corporate properties study benton harbor/st. joseph part ii

SECTION V: PROPERTY EV ALVATION

A. DESCRIPTION

1. General Site Descriptions

The study property is situated in the southwest corner of Michigan in the cities of St. Joseph and Benton Harbor. The St. Joseph property, locally referred to as the Edgewater Area, is bounded by the St. Joseph River to the south. the Ridgeway residential neighborhood to the west, Jean Klock Park at the northwest corner. the interchange between State Highway M-63 and Upton Drive to the nonh, and the Paw Paw River to the east.

The St. Joseph study area is comprised primarily of industrial sites owned by the Whirlpool Corporation (approximately 60 acres) and the former Auto Specialties Corporation site, now owned by the City ofSt. Joseph (approximately 140 acres). Additional parcels include the Michigan Department of Transponation's M-63 and interchange property (approximately 26 acres) and the American Electric Power Company (AEP) sub-station property (approximately 4 acres) . With the exception of an approximately 165,000 s.f. R&D facility owned by 'Whirlpool which is currently being prepared for a 50,000 s.f. expansion, most of the area has been cleared of what were once large manufacturing structures.

The physical and geographic features of the property include the Ridgeway residential area, expensive homes on Lake Michigan immediately to the west of the site, the St. Joseph River, the Paw Paw River, State Highway M-63. the CSX Railroad tracks and nearby Jean Klock Park. Additionally, the Blossomland bridge crosses the St. Joseph River between the site and St. Joseph east of a swing span bridge for the CSX railroad tracks. There is a prominent water tower (City of St. Joseph) and the LaFarge aggregate silos located at the southwest comer of the site along the St. Joseph River.

The central portion of the area west of M-63 consists of industrial land, the northern end of which is characterized by vacant dunelands. The area east ofM-63 and north of the CSX tracks, adjacent to the Paw Paw River, is vacant except for a large electric substation. This area consists of low-lying wetlands adjacent to the river and gentle topography in the upland zones.

On the southern edge of the area along the St. Joseph Ri\'er, the majority of the waterfront is vacant former industrial land that is visible from both S1. Joseph and Benton Harbor. Portions of the waterfront property are filled land, done prior to 1930.

The Benton Harbor property is bounded by Main Street (BRl-94) to the south, the Paw Paw River to the west, Jean Klock Road to the north, and ~orth Shore Drive and Water Street to the east.

The Benton Harbor study area north of the CSX tracks includes several functioning industrial properties and numerous derelict properties under multiple ownership, in the Jean Klock RoadINorth Shore Road/Graham Avenue area, The study area south of the CSX tracks includes industrial and commercial uses ranging from a large scrap iron dealer to Whirlpool's last remaining manufacturing facility in the area to engineering and service companies' offices. Main Street (BRl-94), has numerous derelict buildings and

117

vacant lots which create a decaying image of Benton Harbor' s Main Street commercial area.

The physical and geographic features of the Benton Harbor property include the Paw Paw and St. Joseph Rivers immediately to the west of the site. and the CSX railroad tracks. A fixed span bridge for the CSX railroad tracks crosses the Paw Pa\\· River between Benton Harbor and St. Joseph just north of the confluence ofthe Paw Paw and St. Joseph Rivers, and the Bicentennial Bridge crosses the St. Joseph River between Benton Harbor and St. Joseph just southeast of the confluence ofthe Paw Paw and St. Joseph Rivers. There are prominent electric transmission towers running parallel to the CSX tracks, connecting the main sub-station on Main Street in Benton Harbor to the sub-stations located south of Jean Klock Road on Eighth Street and north of the CSX tracks and east ofM-63 in St. Joseph.

Marine access to Lake Michigan from the waterfront areas of the sites is unimpeded and direct, with the exception of the CSX swing bridge.

A Regional Map, a Location Map, and a Locus Map are included on pages 119-121 .

2. Site Parcels

For this report, the study property being reviewed has been subdiyided into parcels . A Parcel Map is included on page 122.

Parcel One: Automotive Specialties Site

Parcel One is situated on the north side of the CSX tracks west ofM-63 , and extends north to the intersection of Upton Drive and Klock Road. across from the entrance ~o Jean Klock Park. The specific boundaries of this parcel are as follows:

The CSX tracks to the south, the eastern and northern property lines of Whirlpool's Upton Drive facility to the southwest. Upton Drive to the west, the interchange between Upton Drive, Klock Road and M-63 to the north, and State Highway ,\1-63 to the east. This parcel contains approximately 95 acres.

Parcel One was previously improved with Automotive Specialties manufacturing plant which was demolished in 1994. Only the foundations. slabs-on-grade and paving remain. The north part of the site has naturally formed sand dunes which are covered with vegetation and there is an open water element among the dunes. There was a minor league baseball field along M-63 during the 1950' s.

Parcel One includes a 20 acre Renaissance Zone .

Parcel Two: Whirlpool Basin Site

Parcel Two is situated to the west of State Highway M-63 and south of the CSX tracks within the study area. The specific boundaries of this parcel are as follows:

The Whirlpool Basin along the St. Joseph River to the south, Upton Drive to the west, the CSX tracks to the north and State Highway M-33 to the west. This parcel contains approximately 27 acres.

118

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Cornerstone Alliance St. Joseph / Benton Harbor, MI REGIONAL MAP

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St. Joseph / Benton Harbor, MI LOCATION l\1AP

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Cornerstone Alliance St. Joseph / Benton Harbor MI

PARCEL ONE 95 ACRES

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PARCEL TWO 30.S ACRES

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CSX ItAILItOAU PARCEL FIVE 230 ACRES

CITY OF BENTON HARBOR

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The site was previously improved with a manufacturing plant for Whirlpool which was demolished in the late 1980's. Only a gatehouse to the property remains, along with foundations, slabs on grade and paved parking areas.

The parcel is encumbered by an on-off ramp configuration from M-63, which blocks access from the site to the St. Joseph River waterfront.

Parcel Three: Turning Basin Site

Parcel Three is situated to the east ofM-63 and south of the CSX tracks within the study area. The specific boundaries of this parcel are as follows:

The St. Joseph River to the south, the State Highway M-33 to the West, the CSX tracks to the north and the Paw Paw River to the east. This parcel contains approximately 36 acres.

The site was previously improved with a Whirlpool manufacturing plant (same plant as described in Parcel Two). Today the site is not accessible (gated access controlled by Whirlpool) and there are no improvements except for the remains of the manufacturing plant foundations, slabs on grade and paved parking areas.

A rail spur formerly connected this parcel with a property across the Paw Paw River in Benton Harbor also owned by Whirlpool. The bridge connecting the sites no longer exists.

Parcel Four: Paw Paw River Site

Parcel Four is a low-lying area north of the CSX tracks from Parcel Three. The specific boundaries are as follows:

The CSX tracks to the south, State Highway M-63 to the west, Klock Road to the north and the Paw Paw River to the east. Parcel Four contains approximately 53 acres.

There is an electrical sub-station which belongs to the Indiana-Michigan Power Company, an operating subsidiary of AEP, on this parcel which was the source of power for the Whirlpool and Automotive Specialties manufacturing plants. Drainage culverts cross this property between the site of the former Automotive Specialties plant and the Paw Paw River. The northern half of the site is a low lying wetlands area.

Parcel Five: Benton Harbor Industrial Site

Parcel Five of the study area is in the City of Benton Harbor and is located across the Paw Paw River from Parcel Four. The specific boundaries are as follows:

The Paw Paw River to the West, Klock Road to the north and North Shore Drive To Water Street on the east. Main Street (Interstate Highway Business Route 94) to the south including the waterfront from Bicentennial Bridge over the St. Joseph River to the Paw Paw River. Parcel Five contains approximately 230 acres.

This parcel contains numerous industrial properties including two derelict foundries. Additionally, there are several industrial buildings along Graham A venue, North Shore Drive, and Klock Road.

123

The site is crossed from east to west by Ox Creek at a point midway between Klock Road and the CSX tracks. A bridge which crossed Ox Creek on Eighth Street no longer exists.

This study area also includes numerous retail, commercial, and industrial properties along Main Street, some industrial properties adjacent to the CSX tracks, and a large scrap iron yard. There are numerous vacant lots in this area.

Parcel Five includes a 50 acre Renaissance Zone.

B. LEGAL AND FINANCIAL STATUS

1. Ownership

The St. Joseph area encompass several privately and publicly owned land parcels totaling over 200 acres. Major property owners in the area are the City of St. Joseph (former Auto Specialties site), CSX Transportation, the Michigan DOT, LaFarge Corporation, and Anderson Building Supply.

The Benton Harbor area study properties also include publicly and privately owned land and buildings totaling over 300 acres, including Jean Klock Park. Jean Klock Park, located off of Klock Road and M-63 immediately north of the St. Joseph properties, is in the City of Benton Harbor. The 90 acre park, which serves as a regional park with Lake Michigan frontage, is owned by the City of Benton Harbor and operated and maintained by the City's Parks and Recreation Department.

The Benton Harbor properties east of the Paw Paw River are under multiple ownership. Major property owners in the area include the City of Benton Harbor, CSX Transportation, Ox Creek Company, Electric Equipment Company, Martin Brothers, Whirlpool, Walter Wolf, Consumer's Investment Company, and Kinney Investment Company.

An Ownership Map, which outlines ownership of various blocks of land, is shown on page 130.

2. Easements And Encumbrances

No research has been done on specific easements and/or encumbrances on the 159 individual parcels included in the study area. Other than normal public and private utility easements and right-of-ways, it is expected that further easements or right-of-ways associated with railroad and water access exist.

The State of Michigan has a $4.0 million lien on the former Automotive Specialties site now owned by the City of St. Joseph.

3. Real Estate Taxes

On March 15, 1994, Proposal "A" was adopted by Michigan voters. Proposal A provides that until the ownership of any property is transferred (sold), its taxable value may not increase annually greater than the lesser of two multipliers; 5%, or the inflation rate, plus the value of losses and additions caused by physical changes in that property.

124

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The Michigan Constitution still requires that assessments annually be established for each parcel of property according to the value of the property, uniformly and at 50% of the "usual selling price" of a property.

A property's Taxable Value may be increased by more than the inflation rate (2.8% for the 1997 rate) only under one of two conditions:

a.) A physical change to the property occurred before 1997 that was not included in the 1996 assessment. An example is a new garage or any other physical component of property which was added.

b.) Ownership of a property transferred in 1996. In this instance, the 1997 Taxable Value must be adjusted to become identical to the 1997 State Equalized Value (SEV) of that property.

Proposal A states that in the year following a transfer of property, the Taxable Value will be the property's SEV, regardless of the cap.

Property assessment is an annual, three-step process. First, the local assessor determines the assessed value of property. Second, the board of commissioners in each county applies an adjustment factor to the assessments of each city and township in which assessments are above or below the required level. Third, the State Tax Commission applies an adjustment factor to the assessments of a county when its assessments, after the county adjustments, still fail to meet the required level.

On equalization, this resulted in the determination of the property's state equalized valuation (SEV). With the passage of Proposal A, however, the increase in a property ' s SEV, adjusted for all additions or losses, was capped at the rate of inflation or 5%, whichever is less. This capped assessment (taxable value) is now the basis for the property tax assessment. Therefore, a property will have both a SEV and a taxable value. When a property is transferred, however, the following year's SEV becomes the property's taxable value.

In 1995, the state had an average millage rate of 38.88 mills, which generated $7.1 billion in general property tax revenue collected by local units of government. The $7.1 billion was divided among local units of government as shown in Exhibit 5-1.

Exhibit 5-1 Property Tax Distribution

Local Unit of Government

County Township City Village School State Education Tax

1995 % of total Levied

16.1% 4.9%

19.9% 0.8%

42.8% 15.4%

1995 Estimated Dollars

Levied (in Millions) $1,143 .5

$344.6 $1,411.5

$56.8 $3,031 .9 $1,092.8

125

The 1991 to 1996 tax rates for the City of St. Joseph are shown in Exhibit 5-2.

Exhibit 5-2 1991-1996 Tax Rate St. Joseph

Year 1991 1992 1993 1994

1995

1996

City 16.2500 16.2500 16.2500 16.5000

16.9800

16.9600

School Homestead

32.64 32.64 30.97

7.16

7.16

7.00

Source: St. Joseph Assessor

School Non

Homestead

25.16

25.16

25.00

Inter. School District 2.6128 2.6128 2.5013 2.4468

2.4468

2.4470

Lake Mich. Berrien

College County Total 1.9594 5.9025 59.3667 1.9494 6.0122 59.4664 1.8850 5.6759 57 .2832 1.8260 5.6316 33.5683

5 I .5683 1.8560 5.6316 34.0783

52.0783 1.8560 5.6234 33.8864

51.8864

The 1991 to 1996 tax rates for the City of Benton Harbor are shown in Exhibit 5-3.

Exhibit 5-3 City of Benton Harbor Tax Rates - 1991-1996

Year 1991 1992 1993 1994 1995 1996

Total City

35.8129 36.1018 31.6515 30.7419 30.7419 28.6707

Total Area

Schools 32.7261 32.7260 32.0518 24.0000 24.0000 24.0000

Total Inter. School District 2.6125 2.6128 2.5013 2.4468 2.4468

Sou rce: City of Benton Harbor Tax Assessor

Total Lake Mich.

College 1.959 I 1.9494 1.8850 1.8260 1.8560 1.8560

Total County 5.9025 6.0122 5.6759 5.6316 5.6249 5.6234

Total Millage 79.013 I 79.4022 73.7655 64.6463 64.6696 60.1501

The properties in the City of St. Joseph study area are identified by parcel number, address, lot size (if available), assessed value, SEV value, and total tax for the 1996 tax year in Exhibit 5-4. The St. Joseph properties have a total taxable value of $692,400 and total 1996 taxes of $36,285.

An Ownership map is included on page 130.

126

Exhibit 5-4 City of St. Joseph Assessments

Lot Acres Parcel # # Address Owner Size /SF Taxable SEV 1996 Tax

117600230031027 201 Upton Drive Whirlpool Corp. 3.94 Acres $49,900 $49,900 $2 ,615.04

117600230031108 213 Upton Drive City ofSt. Joseph 0.28 Acres

117600230032007 215 Upton Drive Whirlpool Corp. 2.00 Acres 16,200 16,200 848 .97

117600230033003 217 Upton Drive Whirlpool Corp. 3.00 Acres 18,400 18,400 964.25

117600230030012 230 Upton Drive Whirlpool Corp. 2.55 Acres 33,600 33,600 1,760.8 1

117619000001105 230 Upton Drive Whirlpool Corp. 69,300 69,300 3,631.71

117600230031001 231 Upton Drive Whirlpool Corp. 423,700 423 ,700 22,204 .14

117619000137015 Upton Drive Whirlpool Corp. 30,000 30,000 1,572.17

117619000152014 371 Upton Drive Whirlpool Corp. 12,500 SF 8,600 8,600 450.69

117619000015017 387 Upton Drive Whirlpool Corp. 28,300 28,300 1,483 .08

117619000146014 388 Upton Drive Whirlpool Corp . 25 ,000 SF 17,200 17,200 901.35

117619000034011 455 Upton Drive City of St. Joseph

117619000042006 465 Upton Drive City of St. Joseph 6,250 SF


117619000049001 493 Upton Drive City of St. Joseph 10,250 SF


117600140035015 643 Graves Street City of St. Joseph

117600130034061 Auto's Dump City of St. Joseph 89.23 Acres

117600230029103 City Owned City of St. Joseph 3.60 Acres

117619000001091 Cit)' Owned City of St. Joseph 0.46 Acres

117600130034037 I&M Substa Indiana Michigan Power Co. 3.65 Acres 30,200 30,200 1,582.65

117600230031043 State Highway Michigan Dept. ofTrans.

117600130034011 State Hwy. Michigan Dept. of Trans . 26.00 Acres

117600230031035 Tum Basin City of St. Joseph

117600140032016 VAC-Autos City of St. Joseph 1.72 Acres

117600130034053 VAC- \\'hirlpool Whirlpool Corp. 1.49 Acres 700 700 36.68

117600240076002 VAC-Whirlpool Whirlpool Corp. 1.45 Acres 18,100 18,100 948.54

117600130034045 VAC-Whirlpool Whirlpool Corp. 4 .63 Acres 2,300 2,300 120.54

$692,400 $692,400 $36,285 .50

The properties in the City of Benton Harbor study area are identified by parcel number, address and lot size (if available), owner, assessed value, SEV value, and total tax for the 1996 tax year in Exhibit 5-5 . The Benton Harbor properties have a total value of $3,707,605 and total 1996 taxes of$191,751.

An Ownership Map is included on page 130.

127

Exhibit 5-5 Cit~ Qf BentQn HarbQr Assessm!:nts

Lot Acres Parcel II II Address Owner Size ISF Taxable SEV 1996 Tax

115499750307009 III Graham Avenue Modem Plastics Corp. 5.07 Acres $148 ,000 $1 48,000 S9,356.99

115499700030006 136 Colfax Avenue Ross Hadley 6,200 6,200 162 .86

115400130002015 Colfax Avenue City of Benton Harbor 1.77 Acres

115400130002023 Colfax Avenue City of Benton Harbor 2.18 Acres

115400240061033 E. Main Street City of Benton Harbor 5.64 Acres

115499700041008 40 I Eighth Street Triax Tube Co. 276,200 276,200 6,94 7.54

115400130013017 Eighth Street City of Benton Harbor 0.22 Acres

115499750274003 Eighth Street Indiana Michigan Power Co. 0.28 Acres 6,800 6,800 429.94

11 5499750280003 Eighth Street Electric Equipment Co. 22 .50 Acres 6,000 6,000 379.35

11549975041100 I 121 Graham Avenue United Die Cast Corp. 76,800 76,800 4.855 .52

115499750493007 131 Graham Avenue Fritz&Gisela Hoffman 15 ,400 15.400 995 .85

115499750410004 142 Graham A venue Fritz&Gise1a Hoffman 46,300 46,300 2.99·t.07

115499750409006 177 Graham Avenue Walter Wolf 28,400 28,400 1,795 .54

115499750276006 191 Graham Avenue Southwest Development 2.13 Acres 28,500 28,500 1,8H03

115499700065004 309 Graham Avenue Ox Creek Company 17.12 Acres 182,800 182,800 4,598 .16

115499750279005 Graham Avenue Ox Creek Company 13.00 Acres 16.300 16.300 1,030.51

115499750283002 Graham Avenue Martin Bros. Mill&Foundry 3.23 Acres 9,300 9,3 00 587.99

115499750480002 91 Hinkley Street New Harbor Corp. 10,800 10,800 698.37

115499750323004 289 Hinkley Street Martin Bros . Mill&Foundry 7.06 Acres 24,500 24,500 1,548.98

115499750293008 Hinkley Street Martin Bros. Mill&Foundry 2.19 Acres 7,600 7,600 480 .50

115499750270008 123 Hinkley Street Harbor Graphics Corp. 1.45 Acres 57,800 57,800 2,915 .19

115499750271004 155 Hinkley Street Industrial Sanitation Service 0.93 Acres 14,300 14,300 924 .71

115499750272001 Hinkley Street Swan Oil Co. 0.58 Acres 5,300 5,300 34~

115499750273007 Hinkley Street Martin Bros. Mill&Foundry 0.59 Acres 18,900 18,900 1 . 19~

115400130062000 Klock Road Donald Bunnell 0.02 Acres 105 400 6.62

115499750275009 Klock Road New Products Corp. 5.50 Acres 49, 100 49.100 3. 104.27

110302140001017 M-63 City of Benton Harbor 0.01 Acres

115499750324001 151 N. Riverview Dr. Whirlpool Corp. 23 .00 Acres 1,050,900 1.050,900 53,003.16

115499750277002 448 North Shore Dr. New Products Corp. 10.00 Acres 65 ,600 65 ,600 ·U47.42

115499750306002 448 North Shore Dr. New Products Corp. 6.81 Acres 322,000 322,000 20.35 7. 85

115400140060005 Park City of Benton Harbor 0.05 Acres

115408050011006 Riverview Drive City of Benton Harbor

115499750281000 RRRJW CSX Transportation 15,100 15,100 954.65

115403400145009 73 W. Main Street City of Benton Harbor



115499750006009 89 W. Main Street Abonmarche Realty 22,800 22,800 1.441. 50

115403400147010 95 W. Main Street Abonmarche Realty

115499750007005 95 W. Main Street Abonmarche Realty 27,700 27,700 1,751.28

115499750008001 115 W. Main Street 10hn&Doris Florian 37,900 37,900 2,396 .14

115499750009008 133 W. Main Street Fairplain Development Co. 95,600 95 ,600 6.044 .11

115499750010006 153 W. Main Street Sherron Weeks 6,250 SF 18,100 18,100 1,170.45

115499750520012 155 W. Main Street Ross Hadley 7,250 SF 2,700 2,700 174.62

115499750521027 175 W. Main Street Ross Hadley 64,800 64 ,800

115499750011002 205 W. Main Street Maurice Doddington 15,625 SF 34,500 34,500 2,231.02

.... .. /

128

City of Benton Harbor Assessments

Lot Acres Parcel # # Address Owner Size /SF Taxable S[V 1996 Tax

115499750012009 209 W. Main Street Donald Neuser 21,875 SF 34,500 3-1.500 2.181.21

115-1997500 13013 2-15 W. Main Street Carol Traub 13,750 SF 12.600 12.600 796 .62

115499750015008 257 W. Main Street Walter Wolf 0.85 Acres 22,900 22.900 1,4-17.78

115499750085006 299 W. Main Street George & Rachel Keller 18,750 SF 10,700 10.700 676 .50

115499750084000 325 W. Main Street Walter Feldten 15 ,625 SF 19,100 19,100 1.207.56

115499750083003 353 W. Main Street Fortuna Land, LLC 56.250 SF 52,500 52.500 3,319 .23 115499750082007 423 W. Main Street Gordon & Velma Hosbein 9,375 SF 5.700 5,700 360.39

115499750081001 433 W. Main Street Gordon & Velma Hosbein 15,062 SF 14,200 14,200 897 .79

115499750080004 451 W. Main Street Eleanor Peden 1-1,187 SF 19.700 19.700 1.2-15.52

115499750079006 471 W. Main Street Craig Lane 12,500 SF 18.900 18 .900 1.222 .22

115499750078000 499 W. Main Street Consumers Invest. Co. 1.52 Acres 73 ,400 73,-100 4.640.57

115499750077003 579 W. Main Street Benz Enterprises 21,200 21.200 1.3-10.33

115499750075001 585 W. Main Street Leo Krieger 8,300 8,300 52-1 .76

115499750074004 589 W. Main Street Alvin & Irene Keirn 20,900 20.900 1.321.35

1154997500690 19 619 W. Main Street J. Gardner Phillips 0.31 Acres 47,000 47,000 2.54-1 .26

115499700044007 627 W. Main Street Elden Butzbaugh 3-1.600 3-1 ,600 870.34

115499700045003 643 W. Main Street Elden Butzbaugh 38,700 38.700 973.-16

115499750066001 655 W. Main Street Larry Hill 23 ,900 23 ,900 1.511.02

115499750065005 665 W. Main Street Patrick Kinney 2.86 Acres 78,700 78,700 4,975 .67

115499750064009 685 W. ~lain Street Kinney Investmen t Co. 125.100 125. 100 6.-133 .97

115499750063002 711 W. Main Street Central Dock Co. LLC 25,000 SF 58,500 58.500 3,698.53

115400240050007 W. Main Street City of Benton Harbor 0.75 Acres

115499750016004 W. Main Sireet Walter Wolf 4,250 SF 2,300 2,300 145.42

115499750017001 W. Main Street \Valter Wolf 4,250 SF 2,700 2,700 170.72

115-199750071005 W. Main Street Alvin & Irene Keirn 7,100 7, 100 448 .89

115499750072001 W. ~lain Street Alvin & Irene Keirn 2.900 2.900 183.33

115499750073008 \\" . Main Street Alvin & Irene Keirn 2.300 2.300 1-15 .-12

115499750076007 W. Main Street Leo Krieger 2,300 2.300 145 .-12

115403400052019 98 Water Street City of Benton Harbor

115403400052001 106 Water Street City of Benton Harbor 2,625 SF

115403400051012 110 Water Street City of Benton Harbor 3,125 SF

115499750514012 116 Water Street Ross Hadley 6.250 SF 1,600 1.600 103.43

115499750504017 120 Water Street James DeVries 18.700 18,700 1.1 82 .25

115-1997500050 II 12-1 Water Street City of Benton Harbor

115-199750004006 132 Water Street l'ew Harbor Corp. 3.000 SF 13.600 13.600 879.47

115499750003000 136 Water Street New Harbor Corp. 4.100 -1 . 100 265 .18

115499750-176005 146 Water Street New Harbor Corp. 1.100 1.100 7 1.1 2

115499700040001 200 Water Street Brammall Supply Co. 60.700 60,700 1.526.84

115499750340006 204 Water Street Randall Burch, Trustee 22,700 22 ,700 1.-135 . 12

115499750339008 210 Water Street Randall Burch, Trustee 1,900 1.900 120. 13

115403400036005 214 Water Street City of Benton Harbor

115499750338001 218 Water Street Douglas&Jack Miller 10,200 10.200 659.58

115499750337005 230 Water Street Charles Johnson&John Landeck 2,600 2,600 164.38

115400130014013 City of Benton Harbor 3.85 Acres

115446600001002 City of Benton Harbor

115499750325007 Patrick Kinney

115499750326003 Martin Bros. Mill&Foundry 11.11 Acres 16.600 16.600 1,049.55

53 ,707,605 S3 ,707.900 S191 ,75 1.19

129

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OWNERSHIP LEGEND 1. City (If Sl .Joseph 19. II arhor Graphics Corp. 2. Whirlpool Corp. 20. Swan Oilllladley 3. BI""somland Properties 21. Kinney 4. Michi~an Dept. of Transportation 22. IIi11lllulzbaugh/l'hillips/Kelm 5. Indiana Michi~.n Power Krie~er/lkn1.

6. City of Benton lI.rhor 23. Consume,"" Investment Co.lLane 7. Electric.1 Equipment Co. Peden/II""bcinlFortuna Land Inc. 8. New Product,; Corp. FeldtenIKeller 9. Ox Creek Co. 24. WoWTr.ub 10. Trin Tube Co. 25. Neu""r/Doddin~ton 11. Southwest Development 26. II.dley/Week.<lFairpl"in 12. Wolf Development Co. 13. F & G IIoffm.n 27. Hori.nli\bonmarche Realty/City 14. United Die Cast Corp. of Benton IIarhorllIadleyfI)eVrie. 15. Modern I'lastic. Corp. New IIarhor Corp. 16. CSX Tronsportation 28. Brammall Supply Co.lBurch/City 17. Kinney of Benton lIarbor/Miller/Landeck IS. Martin Bros. Mill & Foundry

Industrial Sanitation Service

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Cornerstone Alliance St. Joseph I Benton Harbor MI

OWNERSI-IIP MAP

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C. PHYSICAL CONDITIONS OF THE PROPERTY

1. Transportation And Site Access

The Cities of St. Joseph and Benton Harbor are accessed via Business Route 1-94, an extension of Interstate Highway 1-94 which extends from the southwest part of the state east to the Detroit area. Route 1-94 also connects the St. Joseph/Benton Harbor area with Chicago and beyond to the west.

State Highway M-31, connects the area with South Bend, Indiana to the south and north along Lake Michigan until it connects with Interstate Highway 1-96 which terminates in Grand Rapids.

There is a regional airport, Ross Fields (Southwest Michigan Regional Airport) in Benton Harbor, approximately 3 miles from the study area, which has daily commercial service to Detroit.

The nearest interstate commercial airports are the South Bend, Indiana Airport, approximately thirty five (35) miles south of the study area, and the Kalamazoo Airport, approximately 40 miles to the east.

The CSX railroad crosses the southern portion of the area in an east-west direction, with one track crossing the Paw Paw River and one track across the St. Joseph River. This railroad is expected to remain active. The track is a major Class 3 line, serving as the main link between Chicago, Detroit and Grand Rapids. It is used by 10-12 freight trains daily, which average 100 cars and are 1-1.5 miles long. Amtrak trains use these same lines for passenger rail service to Chicago, 90 miles west, and Detroit, 180 miles to the east.

A limited access, four lane divided highway (M-63), crosses the St. Joseph portion of the study area from north to south. The highway is elevated across the site with no local access except southbound from Upton Drive at the St. Joseph River and at the interchange with Klock Road to the north. The roadway surface is in generally good condition, however, repairs to the bridge structure are needed. Initial discussions have begun with the Michigan Department of Transportation regarding the future removal of the Klock Road interchange and the lowering of the elevated sections of M -63 north of the rail crossing. The Blossomland Bridge (M-63) connects the area to downtown St. Joseph to the south. Downtown Benton Harbor is located on the opposite side of the Paw Paw River.

Upton Drive is the primary access road from the St. Joseph site to M-63. It is located in the western portion of the area, dividing the primarily residential development to the west from the abandoned industrial sites to the east. Upton Drive is accessed from the south by the M-63 bridge over the St. Joseph River and from the north at the Klock Road/M-63 interchange. The concrete and bituminous surfaced roadway is in generally good condition.

2. Surrounding Land Uses

The surrounding land uses to the study area are varied and cover the full range of uses outlined in the St. Joseph and Benton Harbor Zoning Codes. On a parcel by parcel basis, the surrounding land uses are as follows:

131

Parcel One: At the southwest comer of Parcel One is an approximately 165,000 s.f., two and a half story, R&D facility owned by Whirlpool Corporation. A 50,000 s.f. addition is pending for this facility to be constructed contiguous to the north side.

The entire west side of Upton Drive is the Ridgeway residential district which is comprised of a mix of large lakefront houses on large lots on the Lake Michigan side of Ridgeway Street, and smaller houses on smaller lots on the inland side of Ridgeway and Prospect Streets. At the north end of the Ridgeway residential neighborhood is the City of Benton Harbor's Municipal Water Treatment Plant.

North of this facility, adjacent to the northwest comer of the study area is Jean Klock Park, a 90 acre waterfront park situated within Benton Harbor. The park is currently underutilized and some of the facilities are in need of repair.

M-63 borders the Parcel to the east. Beyond M-63 is Parcel Four, an unimproved wetland area bordering the Paw Paw River, and the AEP electrical substation.

The CSX railroad tracks and Parcel Two border the Parcel to the south.

Parcel Two: At the southwest comer of Parcel Two, along the St. Joseph River, there is a 750,000 gallon water tower which is owned by the City of St. Joseph and which formerly supplied fire protection water for the Whirlpool plant.

On an adjacent riverfront parcel west of the water tower, there is a cement silo storage facility which is owned and operated by the LaFarge Co. The cement is delivered to the site by ship,and barge and pumped into the silos, where it is loaded into bulk carriers for regional distribution by truck over the roadways.

There is a steel construction products distributor located across Upton Drive from Parcel Two,just north of the LaFarge property. West of this property, on the other side of the CSX tracks, there is a marina with approximately ninety slips (90) for motorboats or sailboats up to 40' in length.

Further west of these properties at the confluence of the St. Joseph River and Lake Michigan is Tiscomia Park, a public park with access to the beach and breakwater which protects the mouth of the river.

Parcel Three: Parcel Three is bordered by the St. Joseph and Paw Paw Rivers, State Highway M-63, and the CSX tracks. There are no immediately adjacent pertinent surrounding land uses.

The Parcel backs up to the CSX tracks and the AEP electrical substation beyond, and faces the Berrien County Courthouse and jail, the McCoy terminal and the Consumers Terminal across the St. Joseph River. Immediately across the Paw Paw River is a small motel, a vacant car dealership property, the Whirlpool Benton Harbor facility, and the dredge disposal area.

Parcel Four: Parcel Four is also bordered by the CSX tracks, State Highway M-63 and the Paw Paw River. The Parcel is unimproved, with the exception of the AEP electrical substation, and includes a large area of wetlands, as well as industrial waste and contaminated soils.

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Parcel Five: With the exception of two industrial properties, one fronting on North Shore Drive and the other on the Paw Paw River, the area directly to the north of Parcel Five is predominantly a wetland area adjacent to the Paw Paw River.

Directly east of Parcel Five, across North Shore Drive is the North of Main industrial complex.

The area bordered by Main Street in Benton Harbor, the Paw Paw River and CSX tracks has a variety of surrounding land uses including retail stores, offices, restaurants, parking lots, industrial facilities and waterfront uses including material handling, pleasure craft marinas and open spaces.

3. Zoning and Subdivision

St. Joseph and Benton Harbor both have enacted Zoning Ordinances which outline the various uses which can be developed within the two cities.

The property in St. Joseph lies in two zoning districts. Parcels One and Four are zoned Industrial (1-2), which allows some commercial as well as industrial and manufacturing activities. Parcel Two is zoned Open Space (OS), which allows (by Special Permit) planned unit development, residential , restaurant, marinas, recreational retail , office, and various public and semi-public uses. Parcel Three is partially zoned Open Space (OS) and partially zoned Industrial (1-2). Finally, the M-63/Klock Road interchange is zoned Open Space (OS).

The property in Benton Harbor lies in several zoning districts. The primary zoning district, which includes all of the properties from Klock Road to the north, North Shore Drive to the east, the CSX tracks to the south, and the Paw Paw River to the west, are zoned Heavy Industrial (G). The Heavy Industrial district allows almost all uses except residential, although some uses require a Special Permit. The properties between West Main Street and the old ship canal, west of Ninth Street, are zoned Commercial (D-2). The Commercial district allows most residential, office, and other commercial/retail uses . The properties along West Main Street, east of Ninth Street and along Water Street are zoned Business (E), which allows all uses allowed in the Commercial district as well as some light industrial uses

The following exhibits, taken from the Zoning Ordinances for each town, identifies the districts and restrictions which apply to the study area.

A Zoning Map is included on page 134 for reference purposes .

133

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ST. JOSEPH ZONING LEGEND

SYM. DISTRICT USE CJ:::~J H-I SINGU: FAMILY RESIDENTIAL r---', OC OFFIO: COMMERCIAL _ C-J DOWNTOWN DEVELOPMENT ~ I-I LIGHT INDUSTRIAL PARK t.: .. :.: ~:] 1-2 INDIJSTI~IAL

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Exhibit 5-6 Summar~ of Zoning Regulations Cit~ of St. Jos~Vb

Minimum Yard Minimum Maximum Zoning Lot Size Lot Maximum SFfUnit Lot District SF Width Height Front Side Rear {I} Coverage

RI-Res'l. 10,000 75' 35' 30' 7' 30' 1,000 35% R2-Res'l. 8,000 65' 35' 25' 7' 25' 800 45% R3-Res'l. 8,000 65' 35' 25' 7' 25' 800 40%

R3 Multi-Fam. 2,400 (2) 50' 60' 25' 5' 25' 400 50% II a-Indus . N/A N/A 50' 15 ' 30 '(3) 15 ' N/A 75% I I-Indus. N/A N/A 50' 15' 30(3) 15' N/A 75% 12-lndus. N/A N/A 80' 40' 30' 30' N/A 75%

CI-Comm. N/A N/A 35' 15' 7'(3) 7' N/A 50% C2-Comm. N/A N/A 35' 5' 7'(3) 7' N/A 50% C3-Comm. N/A N/A 80 ' 5' (4) 7'(3) 7' N/A 50%

OC-Off.lComm. N/A N/A 80' 15' 7'(3) 7' N/A 50% OS-Open Space N/A N/A (5) (5) (5) (5) N/A (5)

WRD-Water N/A N/A 50' 15' 7'(3) 7'(3) N/A 50% Recreational

Devel.

Notes : (1) Excludes garages/carports (2) Per dwelling unit (3) May build to property line if not adjacent to residential (4) May build to property line (5) Established through special land use process

Exhibit 5-7 Summar~ Of Zoning Regulations Cit~ of B~ntQn Harbor

Maximum Height Minimum Yard Lot Area Off-Street

Use District Stories Feet Front Side Rear Per Family Parking Single Family - single A 2.5 35 30 5 30 7,500 s.f. , 60 ' One space family homes, churches, wide per family schools, parks, golf courses Multiple Family - uses 8 3 45 25 5 25 5,000 s.f. -1 One space permitted in "A" District, 2,500 s.f.-2 per each multiple dwellings, board 2,000 s.f.-3 living unit and lodging houses, hospitals, institutions Multiple Family & Office C 3 45 25 5'-1 sty. 25 4,000 s.f.-I One space - uses permitted in "8 " 10 ' -2 sty. 2,000 s.f.-2 per each district, office, bldgs., 1,000 s.f.-3 living unit or apartments 300 s.f. Local Commercial- uses D-I 2.5 35 25 *** *** same a "c" One space permitted in "c" district, district per each 300 rental shops, restaurants, s.f. of floor banks area Commercial- uses D-2 3 45 *** *** *** same as "c" One space perm itted in "D-I" district, district per each 600 theaters, garages, plumbing s. f. of floor shops, service stations, area motels Business - any use not E JO 120 None None None same as "c" None obnoxious due to emission district of odor, dust, smoke, etc. Light Industrial - uses F 6 90 25 *** *** same as "c" One space permitted in "E" district district per each 300

s. f. of floor area

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Heavy Industrial- any use G any height not ••• ••• •• * residences One space per excepting that certain uses conflicting with not pennitted each 300 s.f. must obtain a special other ordinances of floor area penn it, residences not pennitted Port - uses by public or H 3 45 25 *** *** residences One space port using businesses not pennitted per each 300

s.f. of floor area

* * *For variations and exceptions, see Text of Regulations, None except where adjacent to a dwelling district

4. Flood Hazard and Wetlands

The study property is situated along the St. Joseph and Paw Paw Rivers adjacent to Lake Michigan. The site is relatively low lying, rising only four to six (4' - 6') feet above average water level.

The Flood Insurance Rate Maps (FIRM) for both St. Joseph and Benton Harbor illustrate the potential for flooding. The general boundaries of the FIRM zones are shown on the Flood Map, extracted from the FIRM Maps, on page 137.

St. Joseph:

The Flood Insurance Rate Map for St. Joseph (panel No. 260044 0001 B) as of February 1, 1978, indicates the following Zone Designations within the four parcels in St. Joseph.

Parcel One: There are three (3) zone designations for this Parcel. The majority of the site is within Zone C, an area of minimal flooding. The northeast part of the Parcel, along M-63 to the interchange with Klock Road, is designated as Zone B, an area between the limits of 100 year flooding and 500 year flooding. This designation also indicates an area of shallow 100 year flooding with depths less than one foot. The A.3 designation on this Parcel is situated adjacent to M-63 on the western side of the site, extending into the site at the location of an old rail spur under M-63.

Parcel Two: With the exception of the elevated highway on/off ramps, this Parcel has an A.3 designation indicating it is within an area of 100 year flood .

Parcel Three: This Parcel has the same zone designations as Parcel Two.

Parcel FOllr: This Parcel is entirely within the Zone A.3 designation with the exception of a narrow strip along the elevated highway M-63 which is in Zone B and a small section in the southwest comer at the location of the electric sub-station which is in Zone C.

Belltoll Harbor:

The Flood Insurance Rate Map for Benton Harbor (Panel # 260032 0001B) as of May 15, 1978, indicates the following Zone Designations within the two parcels in Benton Harbor.

Parcel Five: This Parcel is predominately within Zone A.3. There are four isolated areas within Zone B and within three of these zones, there are small pockets which lie in Zone C. The two largest areas of Zone B lie on either side (north and south) of Ox Creek which bisects the parcel from east to west.

136

LEGEND

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Zone A-3 Areas of 100 ~'ear flood; base flood elevations and flood hazard factors determined

ZoneB Areas between limits of 100 "ear flood and 500 year flood; or areas of 100 war shallow flooding with depths less than ~ne foot.

ZoneC Areas of minimal flooding. (No shading)

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South of the CSX tracks is also a mix of three zones. Zone A.3 lies along the edges of the Paw Paw and St. Joseph Rivers and along the barge canal that extends into Benton Harbor north of Main Street. Zone B is situated along Main Street and the CSX tracks to the north. The only area of Zone C is located adjacent to the CSX tracks west of Water Street.

When the proposed redevelopment is undertaken in the study area, several designations identified herein may be favorably modified due to substantial site regrading. When Highway M-63 is reconstructed, the fill used to elevate this roadway and the on/off ramps will be re-distributed across low lying areas at the various parcels. Additionally, the edges of the St. Joseph and Paw Paw Rivers will be improved with bulkheads, which will act as flood control structures, thereby improving the designations of the affected areas.

5. Utilities

The five parcels identified within the study area all have an existing utility infrastructure. This report will not attempt to identify every component, but instead will give a general sense of what currently exists within each parcel.

Parcel One: A series of utility branch lines under Graves Street extend into the site from Upton Drive including an 8" sanitary line, a 20" storm sewer line and 8" water line. Electricity came from the sub-station on Parcel Four. Additional storm drainage for this parcel was collected by underground piping and discharged into the Paw Paw River by culvert.

Parcel Two: Due to the former presence of the Whirlpool manufacturing plant, there are a full compliment of utilities within this Parcel. Domestic water is provided from 12" lines in Upton Drive. Fire protection water is available via 10" lines from the 750,000 gallon water tank at the southwest comer of the site. 12" sewer lines in Upton Drive handled sanitary waste. 12" existing storm sewer lines discharge into the St. Joseph River. There is a 6" high pressure gas line which branches to a 4" medium pressure line. Electricity was provided to the site above ground from the electrical sub-station on Parcel Four.

Parcel Three: Since the Whirlpool plant has been demolished, all of the utilities have been disconnected. Any re-use of this Parcel will require development of all new site utilities.

Parcel Four: With the exception of the electrical volt substation belonging to Indiana Michigan Power Company, there are no known utilities on Parcel Four.

Parcel Five: Given the presence of existing industrial plants north of the CSX tracks (and a number of no longer operating facilities), there is an extensive utility infrastructure in this area. Klock Road to the north has a 20" water line, a 30" storm sewer and a 6" high pressure gas line. The utilities feed down Eighth Street into the Industrial district and on to Benton Harbor Center. There is a 20" water line, a 30" storm sewer and 6" high pressure gas line under Eighth Street. The storm drains in this area discharge into Ox Creek.

A 12" sanitary sewer line in North Shore Drive branches across the parcel adjacent to Ox Creek and extends down the edge of the Paw Paw River to connect with lines adjacent to Main Street.

138

Graham A venue has a 6" water line, a 2" high pressure gas line and a 10" sewer line which runs south to connect with lines in Hinkley Street.

The area south of the CSX tracks is serviced by utilities located in Hinkley Street, a 10" sanitary sewer line and 4" high pressure gas line, and utilities located in Main Street. The lots along Main Street are connected to a 30" storm sewer line which discharges into the St. Joseph River near Bicentennial Bridge. Additional utilities include a 6" water line, a 30" sanitary sewer line and a 4" high pressure gas line.

Although new utility lines will have to be included as part of the master plan improvements, there is sufficient capacity from all of the existing utilities to accommodate almost any proposed reuse of the various parcels.

6.

a. Electrical Distribution

Ele~tric service is provided to the entire study area by American Electric Power (AEP) through Indiana Michigan Electric Company, an operating subsidiary.

b. Natural Gas

Gas service to the entire study area is provided by Michigan Gas Utilities Company.

c. Telecommunications

Telephone service to the entire study area is provided by Ameritech. ...

Environmental Information

The Michigan Department of Environmental Quality (DEQ) is currently studying the former Auto Specialties plant site and surrounding property to determine the types and levels of environmental contamination. DEQ hired Brown & Root, an environmental engineering firm, to investigate and characterize the environmental conditions of the site. They will also develop and oversee a site remediation plan dealing specifically with contamination at the Auto Specialties site.

According to Mr. Robert Hunt, the environmental engineer with Brown & Root, and Mr. David Heywood, the Environmental Quality Analyst at DEQ, the final report should be completed by July, 1997. Contamination from previous industrial uses is known to exist within the study area and any plans for development must deal with the required investigation and remediation.

Contaminants include metals, oil and grease; a layer of oil containing PCB's in the groundwater; oil contamination of unknown extent; and slag, green glass and metals from the bag house dust in an area that was wetlands prior to filling located in Parcel Four. DEQ also found 1, 2-dichlorobenzene in certain areas.

In the northern portion of Parcel One are areas filled with foundry sand and a portion of Parcel One was a wetland filled in with tramp iron. The storm sewer network beneath the site is contaminated, but the extent of contamination is not known.

An area within Parcel One co-owned by Auto Specialties and Whirlpool, known as the "Industrial Rubber Site," was used as a drum storage area for hazardous waste. It has gone through closure and is considered a "clean closure."

139

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Information on the Whirlpool site, Parcels Two and Three, was unavailable, but it was indicated that Whirlpool and DEQ are negotiating a final closure of the site.

There are several areas of wetlands, both high quality and marginal, within the study area. Permits will be required if any proposed development intrudes on wetlands. Discussions with Michigan Department of Natural Resources (DNR) and DEQ indicate that modifications to plans or mitigation of impacts may be required, but that most development would not be precluded.

The Auto Specialties site has two aquifers - one even with the surface water approximately 6' -8' below the surface, and one at approximately 80'. A distinct clay layer separates the two aquifers. The shallow aquifer has metals, benzene and ethyl benzene; the deeper aquifer has levels of arsenic. However, the arsenic found in the deeper aquifer could be due to high natural background.

The DEQ has been actively pursuing "site characterization" and "surface clean-up" on the site since 1990.

While DEQ will not complete its study report until July of 1997, work to date has not exposed any unanticipated problems. In fact, certain areas have been found to be less contaminated than originally anticipated.

DEQ is anticipating Type B and/or Type C cleanup. Type A and B cleanup provide for any kind of development but require cleaning contamination to background or to a no risk level, while Type C cleanup limits development to essentially surface modifications, with no extensive excavation or penetration of soils. Type C cleanup is most likely for the majority of the site.

A Type B or C cleanup will require the redevelopment entity to take appropriate action to prevent exposure to any remaining contamination, prevent exacerbation of existing contamination, and preventing reasonably foreseeable acts of third parties which might create exposure or exacerbation.

Michigan Legislation provides purchasers of contaminated property the ability to eliminate state liability for prior contamination, provided they submit a Baseline Environmental Assessment (BEA) and receive approval of the BEA from the DEQ.

Once surface remediation has been completed, development can be initiated without hampering long range cleanup of any possible ground water contamination. The DEQ has not provided an estimate of remediation costs. However, approximately $2.0 million has been spent on demolition and soils removal and an additional $2.0 million on remedial investigation. Consequently, the state currently has a $4.0 million lien on the property. The DEQ plans to remove contaminated material and then fill the drainage canal, which was a Federally permitted discharge point from the Auto Specialties plant to the Paw Paw River.

No environmental information was available for the Benton Harbor properties. However, given the nature of past and present uses in the Benton Harbor study area, environmental contamination is expected to exist.

140

D. CONCLUSIONS

The St. Joseph properties offer good residential, neighborhood retail, recreational, and waterfront-related redevelopment opportunities. Adjacencies to the established Ridgeway residential neighborhood, Jean Klock Park, the St. Joseph and Paw Paw Rivers, and downtown St. Joseph provide support for a mixed-use redevelopment. Utilities are available for any type of redevelopment.

The Benton Harbor properties north of the CSX tracks offer good industrial redevelopment opportunities. Adjacencies to established industrial companies, the CSX rail yard, and the potential commercial port facility provide support for expanded industrial uses, as does the availability of utilities.

The Benton Harbor properties south of the CSX tracks offer good mixed-use commercial redevelopment oPP9rtunities, provided the City's demographic and economic characteristics improve. A commercial redevelopment, including retail, office, and sales/service uses of Main Street can provide an appropriate buffer between the more industrial uses on the north side of the old Ship Canal, and the historically commercial and retail uses to the south of the old Ship Canal.

Redevelopment of all of the properties will be impacted by environmental contamination and remediation requirements.

141

SECTION VI: REUSE OF ST. JOSEPHIBENTON HARBOR PROPERTIES

A. PREVIOUS STUDIES

Several studies have been commissioned in the past by various groups and for various specific purposes. CPL reviewed each study and the conclusions drawn as they relate to the current redevelopment study. Some of the studies were referenced in previous sections as they related to the economic, demographic and real estate markets. The following highlights studies which relate to redevelopment in the area.

1. Airport To Lakeshore Development Corridor Concept

Access to the St. Joseph properties can be gained by utilizing Red Arrow Highway (BL 1-94) or Niles Road (M-63) from the south, or M-63 from the north, avoiding the deteriorating neighborhoods along East Main Street and Pipestone Road in Benton Harbor.

However, the most direct access to the Benton Harbor properties is along East Main Street or Pipestone Road. The overall intent of the development corridor is to create an attractive and active transportation corridor between 1-94 and the study area.

The airport to lakeshore development corridor concept was conceived by Cornerstone Alliance as a unifying development plan for the travel corridor beginning at the St. Joseph River and continuing along Business Loop 1-94 (West Main Street and East Main Street) to its intersection with 1-94. The plan envisioned mixed-use residential, commercial, office and industrial activities along the corridor, utilizing the existing land, air and water transportation infrastructure and redevelopment of underutilized and/or available land as a means to improve the surrounding residential communities of Benton Harbor, Benton Township and St. Joseph.

Numerous projects were included in the overall concept in an effort to create a unified development plan. These projects are highlighted in Exhibit 6-1, together with their current status.

Exhibit 6-1 Airport To Lakeshore Summary Development Corridor Concept

Project Current Status

1-94IRte. 31 Connector: New, 4-lane divided highway connecting existing 4 lane portion of Route 3 to a full interchange connecting 1-94, BLI-94, and Rte . 31. US 31 Connector $150,000,000 Awaits the final go-ahead pending environmental release . 1-94 Full Interchange $500,000 Included in Final Phase.

Airport (BL-94, Fair to 1-94): Improvements include entryway enhancements, runway extension, resumption of commercial air traffic, and use of direct access off of BL 1-94 as the principal route to the Southwest Regional Airport. Entryway Runway Extension Commercial Air Traffic

$250,000 $8,000,000

$100,000

142

Re-alignment of entryway to Urbandale pending. Runway extension funded, construction to begin in 1997. Annual operating subsidy to Northwest Airlines.


Cornerstone Industrial Park: Dawson

74 Acre industrial park developed by Cornerstone Alliance. $2,800,000 Completed in 1994.

Atlantic Automotive KIWOTO

$2,500,000 Completed in 1993. $350,000 Purchased 10 acres .

10,000 SF Spec Building $300,000 Redirected funding to Job Training Center.

Elisha Gray Enterprise Park: 91 Acre light industrial/technology park developed by Cornerstone Alliance. Whirlpool Media Center $450,000 Infrastructure cost for Whirlpool. Complete. Infrastructure $3,500,000 Estimated cost to complete infrastructure.

Main Street: Improvements in three segments: River View to 8th Street, 8th to Paw Paw, and Paw Paw to Fair. Each segment would correspond to a major roadway improvement project along Business Loop 1-94 Riverview to 8th Street $1,800,000 Reconstruction pending. 8th to Paw Paw $2,800,000 Resurfacing pending. Paw Paw to Fair $250,000 Resurfacing pending.

Edgewater: Evaluation of a development plan for the Edgewater project continues. study included the following elements. Residential - Phase I Hotel/Convention Golfrrennis Club Marina

$3,500,000 $3,000,000 $2,200,000 $3,795,000

No action. No action. No action. No action.

The previous redevelopment

Historic Reuse Lighthouse Depot Property sold to developer for Brewhouse Pub. 1997 completion.

Port: Development centering on the area wide efforts to ensure river barge traffic on Lake Michigan from Chicago to St. Joseph and Benton Harbor. An evaluation of past recommendations on port operations has been completed. Harbor Dredging (Deep Water) $2,700,000 No action. Barge Depot . $1,500,000 Funds applied for to dredge and install sheet piling

($900,000).

Ship Canal: Scope and funding is being reviewed as part of the combined EdgewaterlPort/Ship Canal project. A coordinated development strategy with identification of specific funding mechanisms is being developed. Barge Depot $1,500,000 See above. Recreational Water Feature $1,500,000 No action . Observation Platform Tower $350,000 No action.

City Center Project: Creates a super block between 5th and Pipestone for construction of a 25,000 s.f. commercial office. Restoring the Liberty Theater and coordinated rehabilitation of buildings on the south side of Main between Pipestone and Colfax, including the Landmark Hotel, is anticipated. Liberty Theater Feasibility $8,000 No action. Liberty Theater Reconstruction $500,000 Pending feasibility study. ~ Commercial Office New Construction (25 ,000 SF) $1 ,700,000 No action. Renovation (65,000 SF) $500,000 Completed renovation of 5 buildings. Retail Incubator (35,000 SF) $150,000 No action. Landmark Hotel $3,000,000 Planned rehabilitation as Single Room Occupancy facility

under Michigan State Housing Corporation program.

North of Main: Activities continue to focus using UDAG return moneys to facilitate reinvestment in the area. Job Training Center $150,000 14,000 s.f. facility completed Industrial Building (10,000 SF) $70,000 Purchased and renovated Britain Ave. building. Currently

available for lease.

Community CenterlHall Park: Reuse of the Armory and abandoned roller skating pavilion. Ground breaking for the facility occurred in September, 1996. Funds being used are City CDBG dollars. Hall Park Expansion $15,000 Purchased 20 acres. Community Center $1,500,000 Armory being renovated.

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Morton HilVBelview - Brunson: Neighborhood Restoration promoted by the City of Benton Harbor. CDBG funds for the upgrade of Main Street curb, gutter and side walks Possible use of MSHDA funds for residential rehabilitation and intill new construction is being investigated. Belview-Brunson is a deteriorated residential area adjacent to the Benton Harbor CBD, immediately south of the City Center Project. Work is being done to ensure stabilization of the existing housing stock. The City with the support of Progressive Baptist Church and Cornerstone Alliance is actively pursuing a developer to provide new intill housing. Sidewalk, Curbs and Gutters $70,000 Completed. DemolitionlStabilizationlRehabilitation $100,000 Completed.

Silver Beach/Jean Klock Park Development: Activities have continued to focus on providing a regional recreation/tourist destination point through enhancement of the natural and recreational resources . Jean Klock Park $75,000 Completed. Silver Beach $6,000,000 County project completed by July 1997.

Sportscore: Recreational use envisioned within a mixed-use redevelopment of the older industrial areas of Benton Harbor and St. Joseph. A marketing study for the development of a regional sport facility is being considered. Ice Arena $750,000 No action.

Although several of the projects have been completed, many have stalled, and the revitalization of the corridor envisioned in the concept has not progressed. Further progress is very important to the ultimate success of any redevelopment of the study properties, especially those in Benton Harbor.

2. Development Strategy - Edgewater Area

The purpose of the study, submitted to Cornerstone Alliance by LDR International, Inc.; Hunter Interests, Inc.; Fishbeck, Thompson, Carr & Huber, Inc.; Moffat & Nichol Engineers; and Design Plus, was to develop a plan and strategy to guide the redevelopment for the waterfront area of St. Joseph. Additional property located in Benton Harbor was later examined as part of the study.

The development program included 674 residential units, a 285,000 s.f. office complex, 24,000 s.f. of retail space, a publicly funded conference center and a 150 room waterfront hotel overlooking the St. Joseph River, and a 175 slip marina. With a market orientation toward the Chicago second home market and local residents, the project anticipated phased development between 1995 and 2002 assuming normal recovery from the then current economic recession.

The value of finished sites for condo garden apartments, golf course villas, waterfront townhouses, and waterfront garden condominiums were estimated at $32,000 - $86,000 per unit in 1992, inflating 4% annually. A residual land value analysis for a prototypical 100,000 s.f. of office space was constructed, arriving at a value of $2,365,297 for the 100,000 s.f. office module, or $23.65 per s.f. Similarly, the residual land value of a prototypical 15,000 s.f. retail module was calculated to be $435,562 or approximately $29.04 per s.f. of retail space. Finally, a 150 unit resort hotel was calculated to have a residual land value of$2,721,000 or approximately $23.41 per F.A.R. foot. This land value can also be expressed as $18,142 per room.

The residual land value of the proposed development ranged from $2.1 million to $7.2 million, depending on the development mix and timetable.

However, the proposed residential and office densities and projected absorption were unrealistic, given the market conditions.

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Further, the proposed golf course would have been costly to construct and maintain, and unnecessary, given the existing golfing opportunities in the area. Finally, the residual land values associated with the office, retail, and hotel uses were not achievable.

3. Real Estate Market Analysis For The Benton Harbor Ship Canal Area

This study was prepared for The Community Economic Development Corporation by The Abonmarche Group in August, 1990.

The Ship Canal comprises a site approximately 100' to 150' wide and 3,000' long, commencing at the terminus of the Paw Paw and St. Joseph Rivers and terminating at Pipestone near Main Street. Pipestone and Main Street historically served as the center of downtown Benton Harbor.

, Previous studies developed several conceptual plans to reopen the Canal for public and private recreation development. The Abonmarche study continued this analysis.

The project concept considered the reopening of the Ship Canal, possibly to small boat craft, removal of the Riverview Street bridge, provision of a new rear entrance roadway to service selected businesses, rehabilitation or removal of selected existing structures, plus construction of several new structures. The proposed project was envisioned to include:

• Hotel, Inn or other lodging accommodations • Wet boat storage/slips, (seasonal or transient) • 20,000 s.f.-30,000 s.f. - office space • 1,000-1,100 rental or condominium housing units • 50,000 s.f.-70,000 s.f. - retail store space • Public recreational space • Festival retail and entertainment facilities

Abonmarche concluded that there was no single, defined land use which demonstrated a significant market demand to anchor the development of the project, yet the proposed project relied on 1,000-1,100 residential units being absorbed in a market that averaged 218 residential sales annually. Even if the project absorbed 50% of the total absorption, which is unlikely, an absorption period in excess of 10 years would be necessary.

However, the previous studies and their conclusions regarding market potentials do illustrate several important development criteria which CPL has included in the redevelopment analysis. These include:

• Weak market demand requires a phased approach to development, with incremental expansion occurring only when market demand warrants.

• Massing ofland uses are necessary to develop centers of activity.

• Public spaces and people gathering areas help to create activity, plus use excess land area.

• The commercial port designation and cargo movement activity must be retained to insure continued U.S. Army Corps of Engineers sponsorship of harbor channel maintenance and dredging.

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B. PROPERTY CHARACTERISTICS

1. General

The configuration of Parcel One is good. The site has excellent visibility and access to local and regional roadways. Public rail transportation is available less than 112 mile from the site. All public utilities service the site including water, sewer, electricity, natural gas, and telephone. Physically, however, there are several limitations to ~edeveloping the site, including M-63, the CSX railroad tracks, and the environmental Issues.

The configuration of Parcel Two is fair, limited by the Michigan Department of Transportation (DOT) Right-of-Way (ROW) connecting Upton Drive to M-63 entrance and exit ramps. This ROW cuts off the development parcel from the waterfront. The site has excellent visibility and access to local and regional roadways. Public rail transportation is available less than 114 mile from the site. All public utilities service the site including water, sewer, electricity, natural gas, and telephone. Physically, there are several limitations to redeveloping the site, including M-63 , the CSX railroad tracks, and possible floodplain and environmental issues.

The configuration of Parcel Three is good. The site has excellent visibility and access to local and regional roadways. Public rail transportation is available less than 114 mile from the site. Here too, there are several limitations to redeveloping the site, including M-63, the CSX railroad tracks, possible floodplain and environmental issues, and no public utilities currently servicing the site.

The configuration of Parcel Four is fair. The site has good visibility and potential access to local and regional roadways. Public rail transportation is available less than 114 miles from the site, but no public utilities service the site. Physically, limitations to redeveloping the site are considered too extensive to justify redevelopment, including wetlands, floodplain, and environmental constraints.

The configuration of Parcel Five is fair. The site has minimal visibility and access to local and regional roadways. Public rail transportation is available less than 1-112 miles from the site, and freight rail access is immediately adjacent. All public utilities service the area including water, sewer, electricity, natural gas, and telephone. Physically, there are no inherent limitations to redeveloping the site other than floodplain , environmental , and geotechnical issues.

2. Zoning

Although the current zoning allows most, if not all, of the proposed redevelopment uses, it is expected that future redevelopment may require Special Use Permits, Planned Unit Development, or other redesignations. Given the importance of the project to the area, we do not foresee significant opposition

3. Location

The location of the St. Joseph properties is excellent. Adjacent to an established residential neighborhood, with good access to transportation, developable waterfront, and several recreational beach amenities, the properties are perfectly located to take advantage of the regional growth in tourism-related, second home and recreational demand.

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The Benton Harbor properties are more isolated. The Graham Avenue area utilizes secondary roads to access major arterials, hampering vehicle access. However, rail access is excellent. The West Main Street area is well-located, but needs revitalization. Regionally, both cities are located at the edge of several growing markets, including Grand Rapids and South Bend.

The locational characteristics of the properties support redevelopment.

4. Surrounding Uses

The immediate area surrounding the St. Joseph properties includes residential, research and development, industrial, and commercial and recreational waterfront uses. Whirlpool is expanding its engineering facility from 165,000 s.f. to approximately 215,000 s.f. , and the historic lighthouse property is being redeveloped as a brew pub. These are the only expected ch~nges in the immediate area. Based on these current uses, residential, recreational, and commercial uses would be compatible.

The inunediate area surrounding the Benton Harbor properties includes industrial manufacturing and warehouse/distribution uses, as well as downtown commercial office and retail uses. Based on the surrounding uses, industrial, commercial, or retail development would be appropriate reuses of the properties.

c. FACTORS AFFECTING REUSE

Several factors contribute to the analysis of possible reuse alternatives.

1. Access To Interstate Highways

The properties offer good access to local and regional roadway, air and rail transportation routes. Access to M-63 and Business Loop 1-94, which connect with Interstate 1-94, is less than 112 mile from any of the properties. Interstate 1-94 is the major east/west route connecting Detroit, 180 miles east, with Chicago, 90 miles to the west.

Interstate 1-196, which connects 1-94 with Grand Rapids and Interstate 1-96 to the north, begins in the St. Joseph/Benton Harbor area.

Route 31 passes through the area, connecting with Interstates 1-80 and 1-90, and South Bend, 35 miles to the south.

2. Economic And Demographic Characteristics

As detailed in Section III of this report, the economic and demographic characteristics of the area are not favorable. The population has declined significantly, as has the job base. However, long term growth in both popUlation and employment is forecast, rather than a continued decline. CPL believes that, as the redevelopment proceeds, and as the area grows as a tourist destination, more people and more companies will move to the area, and employment will grow.

3. The Regional Industrial Market

As detailed in Section IV of this report, the Midwest has experienced tremendous grO\vth in warehousing and distribution space requirements, and continued growth in the manufacturing sectors has added to demand for good industrial space.

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Based upon our survey of the St. JosephiBenton Harbor real estate market, as well as our discussions with local brokers, appraisers and public officials, the existing supply of good manufacturing, assembly, R&D, office, or warehouse/distribution facilities for sale or lease is high, given the lack of demand historically for space in the area.

However, the regional growth in warehousing, distribution, and manufacturing, combined with the area's locational attributes, should create an increasing need for warehouse, distribution, and manufacturing space and justifies industrial reuses.

4. The Regional Office Market

Office activity in the region is focused primarily in the Grand Rapids and South Bend markets, which have improved dramatically over the past year. Space is still available in those markets, which have greater pools of workers available as well.

The St. JosephiBenton Harbor office market is static, with no new product added and no significant absorption over the past several years. The market appears to be able to absorb a minimal 20,000 s.f. - 40,000 s.f. annually, based on historical trends.

The St. Joseph waterfront offers an attractive location for commercial office users. A small scale office development is probably feasible, serving the legal and professional community. If a larger office user is secured, the development program could be adjusted accordingl y.

5. The Regional Retail Market

The area retail market began to plateau in 1996, after strong growth in previous years supported by a growing transient population with strong purchasing power. The St. J osephiBenton Harbor area has seen continued growth in commercial and retail establishments along Route 31 and Pipestone Road. Recent growth has predominantly occurred in the Orchard Mall area, which serves as the regional shopping area. Including the "big box" retailers, approximately 200,000 s.f. of multi-tenant retail space was absorbed or committed to in 1996, at rates ranging from $8 .00/s.f. to $14.00/s.f., triple net. Large anchor tenant lease rates are generally $6.00/s.f. - $8.00/s.f., triple net.

The St. Joseph properties present a limited opportunity for retail development, but only in conjunction with and in support of waterfront, residential, and recreational development in the area.

The Benton Harbor properties along West Main Street also present limited opportunity for retail development, and only as the area redevelopment creates the critical mass necessary to support local retail.

6. The Regional Residential Market

As detailed in Section IV, the local residential market is getting stronger, supported in part by increased interest in recreational/second home buyers, as well as retirees. Recent developments north and south of St. Joseph, as well as home sales in the St. Joseph and Lakeshore school districts, confirm the strength of the market.

The residential market strength, together with the locational amenities of the St. Joseph properties, support residential reuse of the St. Joseph properties.

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The Benton Harbor properties do not have good residential characteristics and have not been considered for residential reuse.

7. The Regional Hotel Market

The hotel market in the area has doubled in size in less than 10 years, with little impact to the overall occupancy rates. Discussions with several national conference center operators indicated interest in the St. Joseph location, but require a full feasibility study, which CPL recommends undertaking.

8. The Regional Recreation Market

As an adjunct to the growing tourism industry, several recreation venues have been established in Berrien County. The state and county parks have experienced growth in use, and activities including waterparks, go-cart tracks, and archery are available in Berrien County for the local and tourist contingents.

The St. JosephiBenton Harbor area has only limited passive recreational opportunities, primarily at the beaches. According to the Southwestern Michigan Tourist Council, the area needs an attraction which will provide year-round family oriented recreational opportunities for both regional residents and out-of-state visitors.

CPL surveyed several ice, indoor soccer, and other sports venues in the Grand Rapids, Kalamazoo, and Lansing markets, as well as projects in Illinois and Ohio. A recreation sports complex would serve as a regional draw. Nationally, the fastest growing sports are hockey, soccer, and in-line hockey. Preliminary surveys indicate strong support from area schools for an ice hockey complex, as well as indoor soccer. Approximately 3,000 adults and children have been identified as participants in a hockey program, and 2,400 children currently participate in soccer in the St. Joseph and Lakeshore schools.

Strong interest has been expressed by several developers. Again, a full feasibility study is required and recommended.

9. Environmental Conditions

The environmental conditions of the properties have not been fully delineated. However, the redevelopment of all of the properties will require that the properties be brought to acceptable environmental standards.

10. Political Considerations

Both the cities are supportive of redevelopment of the study properties, and both would like to improve the tax base, the quality of life, and the employment base in the area. Historically, it has been difficult to get the area townships and cities to work together, but this, hopefully, is changing.

11. Marketing Period

CPL believes that a reasonable marketing period, assuming the disposition prices recommended in this report, will be between 12 and 18 months. Nationally, this type of property generally requires a period in the range of 18 to 24 months. It is our opinion that a 12 to 18 month period will be sufficient.

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D. REUSE ALTERNATIVES FOR THE PROPERTIES

CPL reviewed the site's redevelopment potential and developed reuse plans based on our conclusion's regarding the property and our market research. The nature of the regional and local real estate markets and the property characteristics suggest that the facilities are best suited for several different uses, as described below.

CPL's proposal encompasses numerous uses in response to the variety of factors influencing the site, including the following:

• Market Conditions • Demographics • Surrounding Land Uses • Geographical Conditions • Environmental Conditions

Conceptually, we are proposing a mixed use re-development of the property incorporating the following uses:

• Waterfront Park • 2 Marinas - 188 slips total • 100 Residential Townhouses • 150 -200 Room Hotel/Conference Center • 136,800 s.f. Office/R & D Buildings • 300,000 s.f. Recreation Sports Complex • 63,500 s.f. Retail Stores • 110 Lot Residential Subdivision • 5 Barge Commercial Port Facility • 700,000 s.f. Industrial Park

In conjunction with the proposed redevelopment, there is a significant amount of infrastructure work, which includes the following:

• Reconstruct M-63, bringing it to grade north of the CSX tracks and reconstructing the Upton Road and Klock Road interchanges.

• New Access Roads in S1. Joseph and Benton Harbor. • Reconstruct 8th S1. Bridge in Benton Harbor. • Shoreline Bulkhead & Breakwater for Marinas and Port Facility. • Water, Sewer, Storm, Gas, Electricity, and Telephone Infrastructure.

This report will describe the proposed redevelopment of the study area on a parcel by parcel basis.

Parcel One: Former Ausco (Automotive Specialties) Site

Parcel One, which contains approximately 95 acres, will be redeveloped with a variety of uses due to its size, environmental conditions and relationship to surrounding uses. Parcel One will be further divided by the establishment of a new access road with connects M-63 with Upton Drive. The location of the new access road will be determined by the reconstruction ofM-63. Presently, the roadway is elevated approximately 15' above the adjacent grade and creates a visual barrier between Parcels One and Four.

The proposed reuse program calls for this roadway to be reconstructed to an at-grade condition beginning after the bridge across the CSX tracks and sloping downward at approximately a 5%

150

slope until even with grade. This reconstruction will also include the redesign of the elevated M-63/Klock Road interchange into a simple 4-way, at-grade, signalized intersection.

The point at which M-63 stops sloping down from the CSX track bridge and achieves mean grade for a distance of200' is the location for the intersection with the new access road.

Directly north from this new access road connecting M-63 and Upton Drive is the site for the proposed residential subdivision, Parcel One North, encompassing approximately 58.5 acres. The subdivision can be developed in stages, starting with sites contiguous with existing or new roads and expanded as demand allows. According to the DEQ, this portion of Parcel One will be relatively easy to bring to residential standards.

When completed, the residential subdivision will include 110 sites, each containing approximately 12,000 s.f., compatible with the nearby residential neighborhoods. At the geographic center of this new neighborhood will be a 12 acre open space with a pond, walking trails and other passive recreational amenities. Immediately adjacent to this new neighborhood is Jean Klock Park, which will serve as an additional amenity to the development and create additional users and activity for the Park.

At the north end of the development, adjacent to the redesigned intersection between Upton Drive and M-63, will be a 2-acre retail site which would accommodate a 7,500 s.f. convenience type store.

All utilities for the subdivision originate in Upton Drive, including water, sanitary sewer, storm sewer, gas lines and electricity. The realigned Upton Drive/Klock RoadlM-63 intersection creates several housing lots that straddle the St. Joseph and Benton Harbor city limits. It is recommended that these lots be annexed to St. Joseph, and the retail lot remain in Benton Harbor.

A Redevelopment Plan - Parcel One North, is shown on page 152.

The section of Parcel One which lies adjacent to the remaining Whirlpool facility to the west, State Highway M-63 to the east and the CSX tracks to the south, Parcel One South, is proposed to be redeveloped with a Recreation Sports Complex containing approximately 300,000 s.f. along with 90,000 s.f. of office and retail space.

The Recreation Sports Complex will be developed in stages, with a variety of athletic and fitness components to accommodate uses such as ice hockey, figure skating, in-line skating, indoor soccer, tennis, basketball, volleyball, batting cages, golfing cages, or other indoor recreational activities. All of the athletic components will be arranged around a centrally located entry/administration area which also includes a pro-shop, fitness center, men's & women's restroomsllockers, a swimming pool, and a food court. The Zoning Code in St. Joseph requires 1,290 parking spaces for a facility incorporating these uses.

This considerable parking area will be buffered from the adjacent neighborhoods, including the houses along Upton Drive and Ridgeway and the new proposed subdivision north of the new access drive, by the development of six two-story wood structures totaling 90,000 s.f. to be used as retail stores and offices on the ground level with offices or apartments above. The intention is for neighborhood-type offices and stores such as an insurance agency, travel agency, dry cleaners, gift shop, video store, and coffee shop to fill the retail and office space in the buildings. This use requires an additional 270 parking spaces which would be incorporated into the larger parking lot for the Recreation Sports Complex. In total, the Recreation Sports Complex and the office/retail/residential portion of Parcel One contains approximately 36.5 acres.

151

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Utilities for this development originate in Upton Drive and Graves Street, including water, sewer, storm drains and gas lines. Additional infrastructure work required includes the construction of a secondary access road extending the circumference of the site adjacent to M-63 and CSX tracks.

A Redevelopment Plan - Parcel One South, is shown on page 153.

Parcel Two: Whirlpool Basin Site

The focal point of the redevelopment of Parcel Two will be a new marina and residential townhouse development, both of which rely on the vitality of the St. Joseph River and access to Lake Michigan for their success.

Presently, access ramps to and from M-63 north of the St. Joseph River obscure access to the waterfront. Because the waterfront is the key amenity to this site, we recommend the relocation of these access ramps to a location further north adjacent to the CSX tracks where a new access road connecting to Upton Drive is proposed.

Once unencumbered, the site can be improved starting with the marina development and followed by the phased construction of the townhouses.

The marina will have approximately 104 slips and will include a 10,000 s.f. structure to accommodate a ships store, showers and restrooms, offices for marina management, a restaurant/lounge, a tackle shop and drive-up access for the marina. Parking is provided at the ratio of one parking space per slip, located in the existing parking lot south of the CSX tracks on the west side of Upton Drive, north ·of Anderson Metals.

The 100 townhouses will be a blend of two and three story units ranging from 1,200 - 1,800 s.f. per unit, including a one-car garage. The units will be attached but orientation, offsets and screening devices will afford occupants of adjacent units a certain degree of privacy. The units will be wood framed with shingle or clapboard exterior siding for a visual tie-in with the adjacent Ridgeway neighborhood.

Prior to construction of the townhouses, water, sanitary sewer, storm sewer, gas and electricity will have to be extended to the site from utilities in Upton Drive. Parking will be required at the rate of 2 spaces per townhouse.

A central greenspace between the townhouse structures will be improved with a swimming pool and clubhouse for the townhouse residents. A landscape plan will enhance the open spaces and the entire redeveloped waterfront will be accessible to the public.

A Redevelopment Plan - Parcels Two and Three, is shown on page 155.

Parcel Three: Turning Basin Site

Parcel Three has multiple components including a 150-200 room hotel/conference center, a marina and two commercial officelR&D buildings. The proposed reuse recommends that the marina be constructed first to stimulate the waterfront activities.

The marina will be excavated and dredged to a 12' depth sufficient for powerboats and sailboats as large as 40' in length. The entrance to the marina will need a breakwater to offset wind/waves generated by a westerly breeze off of Lake Michigan and by ships using the turning basin.

154

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The marina will have approximately 84 fixed slips and will include a small 1,000 s.f. ships store/tackle shop and shower/restroom facilities. Drop off access and parking will be incorporated into the redevelopment of this site simultaneous with the development of the marina. The infrastructure of this site needs to be developed including the access road to Upton Drive and all of the major utilities including water, sanitary sewer, storm sewer, gas, electricity and telephone.

After developing the marina and the site infrastructure, we believe that market conditions will support the development of a 150-200 room hotel/conference c~nter. The location of this structure will be designed to maximize the views to the St. Joseph River and Lake Michigan beyond. The hotel amenities should include a lounge/restaurant, conference rooms and function rooms which can be adjusted in size to handle a variety of events including business meetings, seminars, and regional conferences.

Access drives and parking at a ratio of one space per room will be incorporated into the development program for the hotel.

The third development component of this parcel includes the phased construction of two commercial officelR&D buildings containing a total of 91 ,800 s.f. Access drives and parking at a rate of four spaces per one thousand square feet (4/1,000 s.f.) will be incorporated into the development program for the commercial office/R&D buildings.

The remainder of the site will be kept as open greenspace with a landscape plan and pedestrian access along the waterfront.

Parcel Four: The Paw Paw River Site

This parcel, situated to the east of State Highway M-63 from Parcel One, contains approximately 53 acres of land, most of which is either regulated wetland or contaminated by previous industrial dumping. Due to the environmental conditions on this site, no active redevelopment is proposed. However, nature trails, boardwalks, or other passive enjoyment activities could be accomplished which would complement the various redevelopment components of the other parcels without compromising the wetlands or disturbing the contaminated areas. At some time in the future, the environmental conditions that currently exist will have to be remediated if this parcel were to be considered for redevelopment.

The existing electric substation will remain as is and no other infrastructure work is proposed.

Parcel Five: Graham Avellue Area

The area east of the Paw Paw River located between Klock Road, the CSX tracks, and North Shore Drive has been designed to incorporate a group of industrial buildings totaling 700,000 s.f. The size of the structures and the extent to which they are subdivided will depend on market demand. The proposed re-use illustrates buildings as small as 31,500 s.f. for a single user (which could also be subdivided) and as large as 147,000 s.f. The larger buildings could be developed as build-to-suits for a single user or subdivided into smaller spaces.

The industrial buildings will be steel frame structures with 30' x 30' bays and 24' clear height. Loading dock facilities are planned for each building and the road infrastructure is designed to accommodate tractor trailers. Soil conditions may impact construction methods, as initial investigations have shown unsuitable organic/peat materials as deep as 1 00 feet.

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Infrastructure work required to support this development includes the distribution of high voltage electricity from the nearby substation. Additionally, water, sanitary sewer, storm sewer, gas and telephone will have to be installed. Rail spurs could be extended from the CSX tracks into the site if necessary for a particular user.

Eighth Street, which bisects the site from north to south, should be rebuilt. A new bridge over Ox Creek is planned as a means to avoid trucks coming from M-63 having to go onto North Shore Drive and then to Graham A venue. However, the new bridge is considered optional and contingent upon federal and state funding. Graham Avenue will have to be rebuilt after the installation of the utilities.

The parcel between the CSX tracks and Main Street (Business Route 1-94), east of the Paw Paw River and west of Water Street, contains properties which need to be redeveloped in accordance with a master plan beyond the scope of this report.

Main Street in Benton Harbor, which is the primary link to St. Joseph to the south, is severely under-developed today. Many derelict buildings have been removed and others remain which should be removed. Remaining buildings which possess any architectural interest should be retained and redeveloped. As the local economy improves due to the redevelopment outlined herein, development sites along Main Street will become popular for sales/service companies, retail stores, and professional offices. A master plan which controls the type of uses and buildings that can be developed along Main Street should be implemented. A cohesive plan can insure that as Main Street is redeveloped, it assumes a character that is appropriate and consistent. Street lights, signs, trees and plantings should all be addressed to ensure a Main Street which will someday (again) generate civic pride from the local population.

Unrelated to the redevelopment of Main Street, but contained within this parcel is an area ofland at the western edge along the Paw Paw River across from Parcel Three. A commercial port facility is proposed for this site which can accommodate 5 barges. The river edge will require a bulkhead and large concrete pad area for unloading materials from the barges and transferring to tractor trailers or rail cars (and visa versa). Development of this barge terminal will ultimately requi:e that the Paw Paw River be dredged to a depth of 12' - 15' as far as the CSX track cross mg.

Graham Avenue would be extended across the CSX tracks to connect with Riverview Drive, and a rail spur would be extended to the port. The port facility will help to keep the trucking and rail freight costs competitive for area manufacturers, as well as offer alternative bulk commodity and container shipping options for the region.

A Redevelopment Plan - Parcel Five is included on page 158.

Redevelopment Summary

The proposed redevelopment includes residential, office, retail, marina, recreational, industrial, and open space uses.

The recreation sports complex will draw from the local and regional communities, and provide an additional draw for enhancing the local tourism industry. A well designed and managed facility would become a significant community focal point not only for the homes proposed in the area, but also for the users of the proposed commercial, office, retail, marinas, hotel/conference center.

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................................

KLOCK RD.


BUILDING "A" BUILDING "B" BUILDING "C" BUILDING "D" BUILDING "E" BUILDING "F" BUILDING "G" BUILDING "H" BUILDING "I" BUILDING "J" TOTAL BUILDINGS "A-J"

PARKING SPACES

COMMERCIAL PORT FACILITY NORTH OF CSX TRACKS SOUTH OF CSX TRACKS TOTAL SITE

~ , . '.

"_ ,.0#"

87,500 S.F. 87,500 S.F.

I-I7,000 S.F. 1-'7,000 S.F. 37,500 S.F. 67,500 S.F. 31,500 S.F. 31,500 S.F. 31,500 S.F. 31,500 S.F.

700,000 S.F.

2,350

11 Acres 126 Acres 93 Acres

230 Acres

REDEVELOPMENT PLAN PARCEL FIVE


158

The combination of a marina and recreation sports complex will enhance the recreational opportunities of the new home and second home buyers targeted for the proposed housing, as well as visiting tourists. A future hotel/conference center will provide further exposure of the area to companies and individuals coming to stay at the center.

The office and retail uses are compatible with residential development, will provide jobs, and improve the tax base for the community.

Similarly, the industrial, commercial, and port development in Benton Harbor will provide badly needed jobs, an increased tax base, and an improved image for the city.

The proposed redevelopment accomplishes the following planning tasks:

• Locates compatible uses adjacent to the existing residential area. The residential subdivision and the neighborhood scale office and retail component compliment the existing uses.

• Maximizes the potential of the waterfront as a setting for marina-oriented residential and commercial development. Relocation of the M-63lUpton Road ramps is a critical component.

• Creates a water amenity for the internal portions of the residential subdivision.

• Provides sites for employment and commercial uses as well as an appropriate mixture of residential products.

• Provides buffers along the major roadway and rail corridors, with landscaping, buildings, and minor roadways.

• Provides new access into the site from M-63. A new road offM-63 provides convenient access for the proposed redevelopment, while mitigating the potential increase in traffic on Upton Drive.

• Responds to the on-site environmental constraints with appropriate land uses. The most contaminated portion of the site, the southern portion of Parcel One, will be developed with commercial uses, which require a lower level of remediation. Further, the development essentially caps the site with buildings and parking, eliminating future risk of exposure.

• The wetlands are preserved as open spaces, and Jean Klock Park will be more fully utilized by area residents providing excellent beachfront opportunities for communitywide recreation.

• Landscaped buffers are anticipated to separate the residential areas from the major road and rail corridors and the utility substation. Additionally, the six smaller-scale office/retail/residential buildings along Upton Drive and the new road between Upton Drive and M-63 will provide a buffer between the recreational sports complex and its associated parking and the surrounding residential areas.

• The hotel conference center proposed for the St. Joseph riverfront takes advantage of its location near the sports complex, the waterfront amenities (including the proposed marina and open space), and downtown St. Joseph.

159

• " 4-/" . ' ~

Exhibit 6-2 summarizes the proposed land uses for the various parcels and the total project.

Exhibit 6-2 Redgvglopmgnt Land Uses And Area

Renais. Open Zone Total

Parcel S~ace Indus. Office Retail Marina Recrea. Hotel Res'\. Overla~ Acres One I \.5(1) 12(2) 2.0 24 .5 56.5 20(3) 95 .0 Two 3.0 3.5 24.0 30.5 Three 7.0(4) 8 0.7 3.0 24 35.7 Four 53 .0 53 .0 Five 126 50 126 .0

71.5 126 20 5.7 6.5 24.5 24 80.5 70 340.2

(1) included in residential. (2) includes office/retail Buildings A-F and associated parking. (3) 7 acres are residential (12 lots), 13 acres are commercial (portion of recreation complex and Bldgs. A-C). (4) included in office and hotel.

Exhibit 6-3 summarizes the density of development for the various parcels and the total project.

Exhibit 6-3 Redevelopment Uses and Amounts

Parcel Indus. Office Retail Marina Recrea. Hotel Res'\. One 45 ,000 s.f. 52,500 s.f. 300,000 s.f. 110 lots Two 10,000 s.f. 104 slips 100 units Three 91,800 s.f. 1,000 s.f. 84 slips 146,000 s.f.

150-200 rm Four Five 700,000 s.f.

700,000 s.f. 136,800 s.f. 63,500 s.f. 188 slips 300:000 s.f. 150-200 rm . 210 units

A Redevelopment Master Plan is shown on page 160.

E. FINANCIAL ANALYSIS

1. Capitalization Rate

The typical real estate investment represents a combination of two segments of capital; mortgage financing and equity. The appropriate capitalization rate should represent a weighted average of current mortgage rates and the return required by equity investors, discounted by the debt reduction and any expected property value appreciation during the holding period.

Development of a capitalization rate in this manner provides the most realistic method of analyzing the relative attractiveness of a real estate investment because it is based upon the true economic conditions of the market.

Based on CPL's experience with similar properties, we project that, in the current market, a mortgage loan equivalent to 75% of the fair market value would be available at an interest rate of 9.5% for 20 years. This yields a mortgage constant of 11.3822% .

161

Real estate equity investors typically expect a return of 10%-40%. The actual rate required on a specific investment depends on a number of factors including the type and condition of property, the strength of the real estate market, and the perceived investment risk. Based on the condition and location of the St. Joseph/Benton Harbor properties, the regional economy and it's real estate market characteristics, and the investment, sale and/or lease-up risk CPL believes that an investor will require a minimum of 30% return on equity.

Based on the mortgage assumptions mentioned above, the outstanding balance on the mortgage loan will decrease by 27.47% over ten years. There is 20% total appreciation forecast for the period, as reflected in Exhibit 6-4. The capitalization rate is calculated as follows:

Exhibit 6-4 Capitalization Rate

Portion

Mortgage Equity

.75

.25

Sub-Total- Weighted Average:

x X

.1138

.3000

The Weighted Average is then discounted as follows:

Portion

Loan Amortization .75 Appreciation 20.00

X X

% Paid

.2747

Sub-Total - Amortization! Appreciation Discount:

Total - Capitalization Rate

X

Sinking Fund

Factor

.0301

.0301

Weighted Average

.0853

.0750

.1603

.0062 ---.Jill@

.0122

.1481

Thus, the appropriate capitalization rate at the stated mortgage constant of 11.3822% and the equity dividend rate of 30%, discounted by loan amortization and appreciation factors I for a 1 O-year investment holding period is 14.81 %, rounded to 15.0%. ~

2. Discount Rate

The discount rate is used to convert future payments or receipts to a net present value and considers all expected property benefits, including the proceeds from sale at the termination of investment. The rate should be similar to investments with similar risk and liquidity, reflecting the relative risk of real estate investments versus available yields from alternative investments.

Historically, investors in institutional-grade real estate have required a rate 250 to 350 basis points above U.S. Treasury bonds with maturities equal to the projected holding period of the real estate. More recently, the required rate spread has increased to 300 to 650 basis points.

162

Ten year U.S. Treasury bonds are currently yielding approximately 6.26%. CPL believes that the required spread associated with an investment in the properties will be at least 575 basis points. Therefore, the discount rate used is 12.0% (575 basis points over ten year Treasuries, 5.75 + 6.26 = 12.01 rounded to 12.0%).

3. Construction Costs

Building costs vary in Michigan depending upon the community in which construction will take place, the size of the building and the type of construction. Still, Michigan compares very favorably with other states when considering building costs, as shown in Exhibit 6-5.

Exhibit 6-5 Construction Cost Comparison Using Similar Urban Areas

Michigan Grand Rapids

86.7 Kalamazoo

95 .0 Lansing

98.8

Illinois Springfield

97.6 Joliet 105.6

Chicago 108.0

Note: U.S. Average is 100

Indiana South Bend

90.4 Indianapolis

94 .8

Ohio Akron 99.0

Dayton 91.3

Cincinnati 91.9

Columbus 93.3

Youngstown 95.9

Cleveland 101.6

Source: 1996 R.E. Means Construction Cost Index

New York Utica 96.3

Syracuse 99.4

Rochester 103 .6

Buffalo 104.7

The projected square foot and total project costs for the various proposed uses are presented in Exhibit 6-6. All of the costs are in 1997 dollars.

Exhibit 6-6 Construction Costs

Total SfUnit SfUnit Construction

Reuse Total Units Range Used Cost Industrial 700,000 s.f. $20-535 $25 517,500,000 Office 136,800 s.f. $75-$\00 S80 $\2,3\2,000 Retail 63,500 s.f. $45-$75 560 53 ,8\ 0,000 Hotel SlRoom \50-200 rms. S80,000-$\20,000 $90,000 $\3,500,000-

$\8,000,000 Recreational 300,000 s.f. $30-$\20 S75 $22,500,000 Residential

Single Family Lots \10 lots $10,000-$30,000 S15,000 $\,650,000 Townhouses (\,400 100 units $80-$\40 $\20 $\5,400,000 s.f. avg.)

Marina \88 slips $6,000-$20,000 $\5 ,000 $2,820,000

4. Financial Feasibility

To evaluate the feasibility of each reuse of the facility, we constructed the multi-year discounted cash flow analyses, as shown on pages 164-170, based on the income and expense assumptions outlined below and using the construction cost estimates presented previously.

\63

Co rners to ne Alliance

S I. JosephlBento n H a rbor, l\1I

Financial Analysis

Parcel One l'iorth - 11 0 Resid ential L ot S ubdi\'i s ionl l R e t a il L o t

C o rporate Properties, Ltd.

1997 1998 1999 2000 2 001 2002 2003 2004 2005

lliC.QMt

Sale Prices· SI. Joseph Residential Lots Inflation Factor 4.00'10 4.000/. 400010 4 .000/. 4.00% 4.00'10 Retail Pucels - SI Acre S20.OOO S20,800 S21,632 S22.497 S23.397 S24,333 S25,306 Intenor Parcels - $1 12,000 SF Lot S25,OOO S26.OOO $17,040 S28.122 S29.247 SlO,4 16 S31,633 Construction Costs - SlLot S15,OOO S15,600 S 16,224 S1 6,873 S 17,548 S1 8,250 S18,980

Lou Available 110 11 0 96 80 62 42 22 Lots Sold 14 16 18 20 20 22

Total Lou Sold 14 16 18 20 20 22

Lot Sa le Income

Retail Lo t 2.00 Acres 5 43,264 Res idential Lots 5)64,000 S432,640 S506,189 S584,930 S608.328 5695,928 Gros$ Income S 364,000 S 475 ,904 S 506, 189 S 584,930 S 608,328 S 695,928 (Commission) 6.00010 (2 1,840) (28,554) (30,37 1) (35,096) (36,500) (41 ,756)

SUBTOTA L - I:-;CO ~IE S 342. 160 S 447.350 S 475.817 S 549,834 S 571,828 S 654.173

f;;-;PE:-;S~S

Site " 'o rkIDemol itio n/Construction

Site Improvements S 2 10,000 S 249,600 S 292,032 5 337.460 S l50,958 S 401,496

(Res idential Lots Only) Total Improvements S 1.841.546 S 210,000 S 249,600 S 292,032 S 337,460 5 350,958 S 401.496

Vnsold Lot Expenses - SlLot Inflation 3.00%

RepairsIMai nt 50.00 J,l75 5,665 5,092 4,37 1 3,489 2,434 l ,l l3

Roads/Grounds 50.00 1,3'75 5,665 5,092 4.37 1 3,489 2,434 1,3 13

Util iti es 60.00 1,650 6,798 6, 111 5,245 4,187 2,92 1 1.576 Real Estate Taxes 250.00 6,875 28,325 25,462 2 1.855 17,445 12,1 72 6,567 Insurance 25 .00 688 2,833 2,546 2, 185 1,745 1,2 17 657 Security 5000 1.375 5,665 5,092 4,37 1 3.489 2,434 1,3 13 Administrative 150.00 4.125 16,995 15,277 13 ,113 10,467 7,303 3,940

Total Unsold Lot Expenses 5 17.46l S 7 1,946 S 64,672 5 55,51 1 S 44,3 11 S 30.918 S 16,681

SUBTOTAL - EXPE JIO SES S 227,463 S 32 1.546 S 356,704 S 392,97 1 S 395,269 S 432,413 S 16,681

:\ET INCOME (LOSS) S (227,463) S 20.6 15 S 90,645 S 82,847 S 154,565 S 139,415 S 637,492

:'iET PRESENT VALUE AT I2,OO% DISCOUNT RATE 5-122,48-1

DEVELOPE R P URCHASE PRICE 5316,863

(IWV LESS 25% P ROFIT)

C AS H F LOW I:'iCLUDI:\G I'iP\' 5 (544,325) S 20,6 15 S 90,645 S 82,847 S 154,565 S 139,415 S 637,492 P URCHASE PRICE

I:-iTERNAL R-\ TE OF RETUR,,"II 16,33 %

FINAI"CIAL MGT RA TE OF RETUR:-i I-I . IS'/. Rei n' .. eslment Rate 6.50%

Cost of Capital 9.50'10

164

Cornerstone Alli3nce

S .. JosephfBenton Harbor.~"

fin3ncial Analysis

Parcel One South - Recreation Sports Complex. 90.000 SF OfficefRetail

Corporate Properties, Ltd.

1997 1998 1999 2000 2001 2001 2003 2004 2005 2006

lliCQME

Luse R.tc.J . St. Jouph ~hrkd Inf13tion F3CtOr 400-;. 400% 4.00% 400% 4.00% 4.00% 4.00·;' 4 00% 4 OO~~ Office Buildings· SlSF. )N (Annu,") 51 000 51040 51 010 511.20 511.60 512 .10 5 12.60 5 1) 10 51 ) 60 514 10 Rcu.il Buildings· SlSF. 3N (Annual) 51200 51 2.50 SIl.oo 51) 50 514 00 51460 51 5.20 51 510 51 6 40 51710

Squire retl Lused SF A .... il.ble Office: Space 45.000 15.000 15.000 15.000 Ret.liISp.= 45.000 15,000 15,000 15,000

90.000 Toul Office SF L=od 15,000 )0.000 45.000 TouJ Office SF Vacant 4.500 4,500 4,500 4,500 4,500

Total Rct.lil SF L:=<J 15,000 )0,000 45 ,000

TouJ Rc::u.il SF VlC3nt 4,500 4,500 4,500 4.500 4,500

Subilized V:Ial1cy R.lt:e 10%

Toul SF V3C.ln' 9,000 9,000 9,000 9.000 9,000

Leue Income Recreation Spons (omple'( Lot S.lIe SI Office Sp= 51 62,000 5))0,000 5504.000 5504,000 5504,000 55)1,500 5574,500 56 12.000

Rct.liISp= 195.000 )97.500 607.500 5607.500 5607.500 5649,500 569).000 S739.500 Gross Income 5 I S S ) 57,000 S 727.500 S 1, 111 ,500 S 1,111 ,500 S 1,111 ,500 S 1, 188,000 5 1,267.500 5 1,)5 1,500

(Vac.lncy) ()5 .7oo) (72.7501 (111.150) (111.150) (I) 1.150) (118.800) ("6.7>01 (1 35. 150)

SUBTOTAL · INCO~IE 5 I 5 5 321,)00 S 654,750 5 1,000,350 S 1,000,350 S 1,000,350 $ 1,069.200 $ 1,140.750 5 1,216.350

EXPE:-.'SES

Sile Work/Demol ition/Construction Site:: Improvements $5 .00 ISF 5 225,000 $ 225,000 Officc Construction 510.00 IS F 5 1,200.000 5 1,200,000 $ 1,200,000 Reuil Construction 560 00 ISF 5 900.000 5 900.000 $ 900.000 Tot.1l lmpro\'ements 5 4,650,000 5 2,325,000 5 2,325,000 5 2,100,000

Undeveloped L.nd/V.cant Sp.ce Expenses· SlSF In nation 3 oo~. RcpairsIMaint 50 10 500 2.060 1.639 1.343 1, 134 1,043 1,075 1.107 1.140 1.174

Ro3dslGrounds $0 10 500 2.060 1.639 1,343 1, 134 1,04) 1,075 1.107 I.l.ao 1, 174

Utilities 50. 15 300 1,236 983 806 680 1.565 1,612 1,660 1,71 0 1,761

Rc.ll E.sut.c: Ta:~es 5025 5,000 20,600 16,3 91 13,433 11 ,339 2.601 2,617 2.767 2,850 2.Y36

Insur.mce 50. 10 2,000 8.240 6.556 5,373 4.536 1.043 1,075 1,107 1.140 1, 174

Security 50 10 1,000 4, 120 3,278 2,687 2,268 1,043 1,075 1,107 1. 140 1, 174 J3IlilOriai 5005 522 537 553 570 587

Administnlivc $D.l5 4,000 16,480 13. 113 10,746 9,071 2,608 2,687 2.767 2,850 2,936

Commission 18,00°1. 57.834 60,021 62,208 78.030 11.000 84.240

TouJ Opcr.l1ing Expenses 5 13.300 5 54.796 $ 101 ,434 5 95.753 5 92,371 5 11 ,477 5 11 ,82 1 $ 90,206 5 9),l41 $ 97,157

SUBTOTAL· EXPENSES 5 13.300 5 2.3 79.796 $ 2,426,434 $ 2,195.753 5 92 ,371 5 11 ,477 5 11 ,8 21 5 90.206 $ 93,541 5 97,157

SUBTOTAL· i>ET I:'\COME $ (1) .299) 5 (2 ,379,796) $ (1 , 105, 134) 5 (1.541 .00) 5 907,979 S 9M8.173 5 988.529 $ n8.994 5 1.047.209 $ 1.11 9. 193

S.lIt! Pl'OQ!Cds" 2006 Nl!t Income capiuliZl:d at 1500% 5 7,461,285

(Closing Costs) 600% (447.677)

Net Sale Proceeds $ 7,O ll ,608

:-.'ET II>COME (LOSS) $ ___ (' L!99) 5 !2 )79 796l 5 !2 105 1) 4l L(ll41.0Il3 ) 5 Q()7 .9iQ S 9KM M73 _5_ 98R529 _5 _ 97M994 LK.060.MI7

:-.'ET PRESENT VALUE AT

12,00% DISCOUI>T RATE S424.274

DEVELOPER PURCHASE PRJCE SJI8,206

(NPV LESS 25·/. PROFIT)

CASH FLOW L";CLUDlNG ($))1.504) 5 (2,379,796) $ (2. 105.134) $ (1,541 ,00)) $ 907,979 5 988,87) 5 988,529 5 978,994 5 8,060,8 17

PURCHASE PRJCE

lNTER.";AL RA TE OF RET(;R. ... 12,42·/0

FL";ANCIAL MGT RATE OF RETUR.'1 11 .07·1. Reinvestment R.lt:e 650"1. Cost of C3.piul 9.500/.

165


St. Joseph/ Benton Harbor, I\tI

Financial Analysis

Parcel Two - 100 Residential TownhousesIJ04 Slip Marina &10,000 SF Marina Building


1997 1998 1999 2000 2001 2002 2003 2004

lli.CQME

Waterfront S.le Prices - St. Joseph Market Inflation Factor 4.00% 4 .00% HlO"1o 4.00% 4.00% 4.00% 4 . 00~'

Residential Housing Sale Value - S/SF S 165 SI72 SI79 SI86 SI93 5201 5209 5217 Marina Site Sale Value - S/Acre S20,OOO 520.800 S21 ,632 S22,497 S23,397 524,333 525,306 S26,319 Residential Construction - S/SF S120.00 S124.80 5129.79 5134.98 5140.38 5146.00 51 51.84 5157.91

Housing Sales HUniU Total Square reet

1,200 SF Units 50 60.000 . 10 10 10 10 10

1,800 SF Units 50 90.000 - 5 5 10 10 10 10

100 150.000

Total 1.200 SF Units Sold . 15 15 20 20 20 10

Income

Marina Site Sale 6.5 Acres 5135,200

1.200 SF Units - 52,142.000 S2.227,200 52.316,000 S2,408,400 52,504,400 SO

1,800 SF Units 1.606,500 1.670.400 3.4 74,000 3,612,600 3,756,600 3.906,000

Gross Income S S 135,200 5 3,748,500 S 3,897,600 5 5,790,000 S 6,021,000 5 6,26 1,000 5 3,906,000

(Commission) 6.00% (8, 112) (224.9 10) (233.856) (347,400) (361.260) (375,660) (234,360)

SUBTOTAL· I;'I;COME 5 5 127,088 S 3,523,590 5 3,663,744 5 5,442,600 5 5,659,740 5 5,885,340 5 3,67 1,640

EXPEl"SES

Site \VorkIDemolitionlConstruction Site Improvements SIO,OOO !Unit S 333,333 S 333,333 5 333,333 5 -Residential Construction 5 2,620.800 5 2,725,590 S 4,049,400 5 4,211.400 5 4,380,000 5 2,733.120

Total Improvements 5 21,720,3 10 S 2,954,133 S 3,058,923 5 4,382,733 5 4,211,400 5 4,380,000 5 2,733, 120

Unsold Unit Expenses· SlUnit

Inflation 3.00%

Repairs/Maint 5100.00 2,500 10,300 9,018 7,649 5,628 3,478 1.194

Roads/Grounds S 100.00 2,500 10,300 9,018 7,649 5,628 3,478 1, 194

Utilities S250.00 6,250 25,750 22,544 19, 123 14,069 8,695 2,98 5

Real Estate Taxes 5500.00 12,500 34,333 45,088 38,245 28, 138 17,389 5,970 .

Insurance 5150.00 3,750 15,450 13 ,526 11.474 8,441 5,217 1.791 -Security S300.00 7,500 30,900 27,053 22,947 16,883 10,433 3,582 . Janitorial 5100.00 2,500 10,300 9,018 7,649 5,628 3,478 1.194

Administrative S200.00 5,000 20,600 18,035 15,298 11,255 6,956 2,388

Total Operating Expenses 5 42,500 5 157,933 5 153,300 5 130,035 5 95,668 5 59, 123 5 20,299 5

SUBTOTAL· EXPEl"SES 5 42,500 5 3, 112,067 5 3.212,223 5 4,512,768 5 4,307,068 5 4,439, 123 5 2,753,419 5

NET Il"CO:\IE (LOSS) 5 (42, 5OOl Lp·984.9791 _5 __ 31 1 367 _5 _ (849.024l _5 _.hill.ill _5 _1lli.ill _5 _lli.illl L llZ.!...2:!Q

~ET PRESEl"T VALUE AT

15,00% DISCOUNT RATE SI ,029,485

DEVELOPER PURCHASE PRICE S772,114

(NPV LESS 25% PROFIT)

CASH FLOW INCLUDING (S814,614) S (2,984,979) S 311,367 5 (849,024) S 1,135,532 S 1,220,617 5 3,13 1,921 5 3,67 1,640

PURCHASE PRICE

INTERNAL RATE OF RETURN 16,59%

FINANCIAL MGT RATE OF RETURN 13,55%

Reinvestment Rate 6.50%

Cost of Capital 9.50%

1C.C.

Cornerstone Alli2nce Sr. JosephlBenton Harbor. MI

Financial Analysis Parcel Thr .. (A)· 200 Room Hot<UConfer<nc< Center, 91 ,800 SF" Office, and 84 Slip ~I.rin.

Corporate Properties. Ltd.

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

!liCQlli;

Lus~ and Salt Values .. SL Joseph Marktt Inflation F3Ctor 4 00·/. 4.00% 4.00% 4 00% ~ .OO~~ ~ O()~ ;. 4 00% ... OO~o " OO· ~ Office Buildings .. SlSF. 3N (Annual) 51000 51 0 40 51080 511.20 511 60 512. 10 51 260 513 .10 51 360 5141 0 Office Construction Costs - SlSF 580.00 5&3.20 53610 590 00 59360 597.30 51 01.20 51 0120 5 109 40 SI1 380 M3tina Site Sale Value .. S/Acn: 520.000 520.800 521 .632 522 .497 513.397 52nll 5l1.306 526.3 19 Sn.371 S2&."66 HotcllConfen:ncc Center Site Sale Value .. S/Acn:: 520.000 520. 800 521 .632 522.497 SB.397 S24.333 S25.306 526.3 18 S~ 7.371 S2K.J66

Square Fed Leased SF A\'Iilablt Oflic.:Sp= 91.800 37.KOO 54.000

9 1.800 Tou! Office SF u3.Std 37.800 9 1.800 TouJ Office SF VX.1n1 ~.IXO 9.180 9.180 9.180 <l. ISO Subiliz.cd V3C:l1lcy R."lI:e 10%

Incom~

M3tina Sill: S.l1e 3.7 Acres 576.960 Hotel Site S.l1c 24 Acres 5l I9. 16! Office Sp.lCC 5423.360 51.049.760 51.049.760 1.049.760 1.049.760 SI . 140AKO 51.275 . .1 80 Gross Income 5 5 76.960 5 l19. 168 5 423.360 5 1.049.760 5 1.049.760 5 1.049.760 5 1.049.760 5 1.140.480 l 1.275 .480 (V3C:l1lcy) ( 104.976) (104 .976) (104 .976) (11 4.04K) (127.5 481

St:BTOTAL .ISCOME S 5 76.960 5 l19. 168 S 4~3.360 S 1.049.760 S 9"'4.784 S 944.784 S 944.784 S 1.026.·02 l 1.147.932

EXPE:'iSES

Sile Work/Demolition/Construction

Office Construction l 3.~ftQ.700 5 4.860.000 Totallmpro\"emcnts 5 IU29.700 5 3.269.700 5 4.860.000

Vacant Spac~ E1.ptnsc:s - SJSF Inflation 3.00% Repai~f.t.int 50.10 2.29l 7.092 4.870 1.47l 1.064 1.096 1. 129 1.163 1. 198 Roads/Grounds 5010 2.29l 7.092 4.870 1.4 7l 1.064 1.096 1. 129 1. 163 1. 198 Utilities 50. ll 3.443 10.637 7.304 2.213 1.l96 1.644 1.694 1.7"'4 1.797 Re31 Esutc:T;L'I((s 502l 5.738 17.729 12.174 3.688 2.661 2.740 2.823 2.907 2.994 Insurance 5010 2.29l 7.092 4.870 1.47l 1.064 1.096 1.129 1. 163 1. 198 Security 50 10 2.295 7.092 4.870 l.47l 1.064 1.096 1.I~9 1. 163 1.1 98 h.tl itori31 500l 1.148 3.l46 2."35 738 III l48 565 5XI 599 Admini Slr31.i ve 502l 5.738 17.729 12. 174 3.688 2.661 2.740 2.823 2.<~O7 2.99.1 Commission 18 OO~' (17.2 45) 112 .752 92.~; J 137.0l2

Total Opcf"3[ing E~p.:nscs S 25 ,1~5 5 78.007 5 l3.565 5 (1.018) 5 112.7l2 S 11.706 5 12.058 5 12." 19 S I05j26 5 IlO.228

SUBTOTAL·EXPE~SES 5 25.245 5 78.007 5 3.323.265 S 4.8l 8.982 5 11 2.7l2 5 11 .706 5 12.0lK 5 12.419 5 IOl.ll6 5 150.228

SUBTOTAL· ~ET lIiCO~IE 5 (25.24l) 5 (1.047) 5 (2.804.097) S (4 .435.622) 5 937,008 5 933.078 5 932.726 5 932.36l 5 921.106 5 997.704

S31\! Proceeds' 2006 Net Income C3piuJiu d 3.J. Il OO% 5 6.65 1.363 (Closing Coru) 600% OQ9.0K2)

NCI S31\! Proceeds 5 6.2;2.28 1

:'iET I:;CO~IE (LOSS) 5 ___ (25 .245) 5 __ 1!.047) L P ~04 0<17) LP 4~5 . 1l22) _5 _ Q37.{KHI _l_4J:\ .fI7M S <l~2 . 7~6 S Q32.365 l 7. 173.3X7

:'iET PRESEIiT VALUE AT 12.00-/. DISCOU~T RATE (5502 .324)

167


St. JosephfBenton Harbor, MI

Financial Analysis

Parcel Three (8) - 200 Room HoteUConference Center, 91,800 SF Office, and 84 Slip Marina


1997 1998 1999 2000

Il"COME

Lease and Sale Values - SI. Joseph l\-\arket Inflation Factor 4.00% 4.00% 400% Office Buildings - $/SF, 3N (Annual) $10.00 $1040 $10.80 $11.20 Office Construction Costs - $/SF $80.00 $83.20 $86.50 $90.00 Marina Site Sale Value - $/Acre $20,000 S20,800 $21 ,632 $22,497 Hotel/Conference Center Site Sale Value - $/Acre $20,000 520,800 $21 ,632 $22,497 Office Site Sale Value - $/Acre $15,000 $15,600 $16,224 SI6,873

Income Marina Site Sale 3.7 Acres - $76,960 Hotel Site Sale 24 Acres - - $519,168 Office Space 8 Acres - - $134,984 Gross Income $ - $ 76,960 $ 519,168 $ 134,984

Commission 6.0% ($4,618) ($31,150) (S8 .099)

SUBTOTAL - I:"ICO'.IE $ - $ 72,342 $ 488,018 $ 126,885

EXPEl"SES

Vacant Land Expenses - S/Acre Inflation 3.00% Repairs/Maint $10.00 89 320 80 Roads/Grounds $1000 89 320 80 Utilities $25 .00 223 800 200 Real Estate Taxes $500.00 4,463 16,000 4,000 Insurance $25 .00 223 800 200 Security $25 .00 223 800 200 Administrative $100.00 893 3,200 800

Total Operating Expenses $ 6.203 $ 22,240 $ 5,560

SUBTOTAL-EXPE:\SES $ 6,203 $ 22.240 $ 5,560 $ -

SUBTOTAL-~ETI:"ICOME $ (6,203) $ 50,102 $ 482,458 $ 126,885

NET Il"CmIE (LOSS) $ (6.203) -$-_iQJ.Ql -$-~ -$-~

NET PRESENT VALUE AT

12.00% DISCOUNT RATE 5513,458

DEVELOPER PURCHASE PRICE S3851094

(NPV LESS 25% PROFIT)

CASH FLOW I;'\CLUDIl"G ($391,296) $ 50,102 $ 482,458 $ 126,885 PURCHASE PRICE

I~TERt'iAL RA TE OF RETURt'i 28.45%

FINANCIAL MGT RATE OF RETURN 21.25% Reinvestment Rate 6.50% Cost of Capital 9.50%

Cornerstone Alliance St. J osephlBenton Harbor, MI financial Anal)'sis Par«1 Five (A) - 700,000 SF Industrial


\997 199' 1999 2000 2001 2002 200) 2004 2005 20M

~

lus~ Ind Slle Values - SI. Joseph Mlrkct Inflation Factor 400'"1. 4 00'"1. 4 00'"1. 4 00% 4 00% 4 00% 4 00% 4 00°. 4 OO~" New Industrial Buildings - Sf SF, 3N (Annual) 52.75 5190 noo B . IO 5320 53.30 S3.40 5350 S360 S370 lndustriaJ Construction Costs· S/SF 525.00 526.00 527.00 52&.10 529.20 BO.40 531.60 512 90 S3420 S3S,60

Squire F~t lCls~d SF AVlillbl~

Offi« Spa« 700,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000

700,000 TouJ Industrial SF lused 100,000 200,000 300.000 400,000 500.000 600,000 700,000 TouHndustri.1l SF Vac:mt 70,000 Subilizcd V3C.atlcy R31.e 10%

Incom~

Industri.1l Sp.lCC 300.000 56 10.000 5930.000 51.260.000 51 ,600.000 5 1.050.000 S ~ ,3 1 0,OOO 52,3 10.000 Gross lncome: 5 5 5 300,000 5 6 10,000 5 930,000 5 1.260.000 5 1,600,()()U 5 1,95U,Uoo S 2.310,000 S 2.3 10,000 (V3Cal1cy) (231,000)

SUBTOTAL -I:-ICOME 5 5 S 300,000 5 6 10,000 5 930.000 5 1,260,000 5 1,600,000 5 1,950,000 5 2.)10,000 S 2.079.000

EXPE:-ISES

Site Workl DemolitionlConstruction

Industril.1 Construction 5 : .600.000 5 2.700.000 S 2.&10 .000 5 2.Q2U.OOO 5 3.040.000 S 3.160.000 S 3.29U.000 TouJ Imprme:menlS 5 20,520,000 5 2,600,000 5 2,700,000 5 2,110,000 5 2.920.000 S 3,040,000 5 3,160,000 S 3,290,000

Vaclnt lind Elpens« - SJSF Inflation 300% R('pJ.i~bjnl 500 1 1.750 7.210 6.365 5.464 4,502 3.47& 2.31& 1.230 913 Road s/Grounds SO.OI 1.750 7,210 7,426 5,464 4 .~0 2 3.47& 2.388 1.130 913 Utilities 50.DI 1,750 7.2 10 7,426 5,464 "' .502 3.47& 2,3&& 1.230 91l ~aJ Esutc Ta.xe:s 50.04 7,000 2&, &40 29,705 21 ,&55 18,00& 1l,911 9,552 4.9 19 3,653 lnsurance 5002 3,500 14,420 14,&53 10,927 9.004 6,956 4.776 2.460 1,&27 Security 50.QJ 5,250 21,630 22 ,279 16,391 13.506 10,4)) 7, 164 3,690 2,740 Administr.lti\'e 50.03 5.250 21,630 22,279 16,391 13.506 10,4)) 7, 164 3,690 2. 740 Comm ission I! 00'/0 54.000 55.!00 57.600 59,400 61.200 63 .000 64 .&00

TouJ Opc:r:l1ing Expenses 5 26.210 5 108, 110 5 IfH,334 S IlJ.JII 5 121.131 5 111 ,167 5 97,022 5 81.4H 5 64,Moo S 13.700

S~BTOTAL-EXPE:-ISES S 26.250 5 2.70&, 110 5 2,&64,334 5 2,947.715 5 3.045. 13 1 5 3.111.567 5 3.257,022 5 3,371."'4" S 64.800 S 13,700

SUBTOTAL - "'ET I:-iCOME 5 (26.250) 5 (2.70&,110) 5 (2.564,33 4) 5 (2 .337.715) 5 (2 . 115.1 31) 5 (1.&91,167) 5 (1 .657.022) 5 (1,421.441) S 2.~';5.~OO 5 2.061,300

SJJe Procc:c:ds 2006 NI!'t Income: c.apiuJizcd at 1350% 5 1I,29K,II! (Closing COSlS) 600% (917.911)

Net SJJc Proc.eeds 5 14.380,607

~ET I:-iCO~IE (LOSS) _5 __ 126.2<0) 1- (2708. 110) L (2564.))4) 5 {2 J37.75~1 LC2II~.I3 I) L II.K91167) L {l657.0m LII.4 2 1.44 ~) s 11;,1)25 S07

~ET PRE5E~T VALUE AT

12.00·/. DISCOU~T RATE (53,337,614)

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Sf. JosephlBenton Harbor, :\11

Financial Analysis

Parcel Five (8) - 700,000 SF Industrial


1997 1998 1999 2000 2001 2002 2003

INCQl\It;

Lease and Sale Values - St. Joseph Market Inflation Factor 4.00% 4.00% 4.00% 4.00% 4.00% 4.00% Industrial Site Sale Value· 5/Acre 52,000 52,080 52.163 52,250 52.340 52,434 S2.531

Industrial Acres Sold 100 10.00 15 .00 15.00 20.00 20 .00 20.00

Income

Industrial Site Sale 520,800 532,445 533,750 $46,800 548.680 S50.620

Gross Income 5 5 20,800 5 32,445 S 33,750 5 46,800 5 48.680 S 50.620

Commission 6.0% (51.248) (51.947) (52.025) (52 .808) (S2.921) (53.037)

SUBTOTAL· INCO;\IE 5 5 19.552 5 30,498 S 31,725 5 43.992 5 45.759 5 47.583

EXPENSES

Vacant Land Expenses· S/Acre Inflation 3.00% RepairSiMaint 510.00 250 927 796 656 450 232 Roads/Grounds SIO .OO 250 927 796 656 450 232 Utilities 525.00 625 2,318 1,989 1,639 1,126 580

Real Estate Taxes 5250.00 6,250 23,175 19.892 16,391 11,255 5,796 · Insurance 525.00 625 2,318 1,989 1.639 1,126 580 · Security 525.00 625 2,318 1,989 1,639 1,126 580

Administrative 5100.00 2,500 9,270 7.957 6,556 4,502 2.319

Total Operating Expenses 5 11,125 5 41.252 5 35,408 5 29.1 76 5 20,034 5 10.318 S

SUBTOTAL · EXPENSES 5 11,125 5 41,252 5 35,408 5 29,176 5 20,034 5 10.318 5 ·

SUBTOTAL· I\'ET Il'iCOl\IE 5 (11,125) S (21,700) 5 (4,909) S 2,549 5 23,958 S 35,442 5 47,583

:\,ET Il"COME (LOSS) 5 ___ WJ..lll 5 (21.700) _5 __ (U09) _5 __ ll!2 5 23.958 5 35,442 _S __ 47.583

;>';ET PRESEl"T VALUE AT

12.00% DISCOU;\,T R\ TE S26,8~~

DEVELOPER PURCHASE PRICE S20.l33 (NPV LESS 25% PROFIT)

CASH FLOW I:\'CLUDING (S31,258) 5 (21,700) 5 P.909) S 2,549 5 23.958 5 35.442 5 47.583 PURCHASE PRICE

Il"TER;'IAL RATE OF RETUR"I 14.87%

FI)I;ANCIAL MGT RATE OF RETUR,"I 13.12% Reinvestment Rate 6.50% Cost of Capital 9.50%

" •.• -.--.J

170

" ~ " . ::- .,~'"'

a. Parcel One North - 110 Lot Residential Subdivision and 2 Acre Retail Site

CPL assumes that 14 lots would be sold in 1998, 16 lots sold in 1999, 18 lots sold in 2000, 20 lots in 2001, 20 lots in 2002, and 22 lots in 2003. The 2 acre retail lot is projected to sell in 1999. Construction costs ranging from $15,000/10t to $18,980/10t are included, assumed to be incurred in the year prior to sale.

Lot sales are projected at $26,000 - $31 ,633/10t. Unsold lot expenses are projected for 3 months in 1997, and decline annually as lots are sold.

Cash flows are then discounted at 12.0% to arrive at a net present value. An additional 25% discount is applied to reflect a developer's profit. The Internal Rate of Return (IRR) and Financial Management Rate of Return (FMRR) are 16.3% and 14.2%, respectively.

The net present value of the Residential Subdivision/Retail Site Reuse is $316,863, as shown on page 164.

b. Parcel One South - 300,000 s.f. Recreation Sports Complex and 90,000 s.f. Commercial OfficelRetail

CPL assumes that the site for the Recreation Sports Complex is sold in 1997 for a nominal $1, to spur development in the area. The office/retail buildings are projected to lease 15;000 s.f. of office space and 15,000 s.f. of retail space each year for three years, beginning in 1999. Lease rates are projected at $10.80 -$11.60/s.f., triple net, for office space and $13.00 -$14.00/s.f., triple net, for retail space.

Construction costs of $2,325,000 in 1998, $2,325,000 in 1999, and $2,100,000 in 2000 are included. Undeveloped land/vacant space expenses are carried for 3 months in 1997, and decline as the office/retail buildings are leased.

The analysis assumes a theoretical sale of the buildings in year 2005 based on the 2006 year's income, including a stabilized vacancy rate of 10.0%. The resulting net income in 2006, $1,119,193 is then capitalized at 15.0% and sale costs of 6% are deducted. This generates net sale proceeds in 2005 of$7,013,608.

Cash flows are then discounted at 12.0% to arrive at the net present value of the reuse. An additional 25% discount is applied to reflect a developer's profit. The IRR and FMRR are 12.4% and 11.1 %, respectively.

The net present value of the Recreation Sports Complex and Commercial Buildings Reuse is $318,206, as shown on page 165.

171

"',,'::I!.

c. Parcel Two - 100 Townhouses, 104 Slip Marina 'Vith 10,000 s.f. Marina Building

CPL assumes that the marina site would be sold in 1998 for $135,200 ($20,800/acre). The first 15 townhouse units would be sold in 1999, 15 units in 2000,20 units in 2001, 20 units in 2002,20 units in 2003, and 10 units in 2004, at prices ranging from $ 179/s.f. to $217/s.f. Construction costs of $2,954, 133 in 1998, $3,058,923 in 1999, $4,382,733 in 2000, $4,211,400 in 2001, $4,380,000 in 2002, and $2,733,120 in 2003 are included. Unsold unit expenses are carried for 3 months in 1997 and decline as the residential units are sold.

Cash flows are then discounted at 12.0% to arrive at a net present value of the reuse. An additional 25% discount to reflect a developer's profit. The IRR and FMRR are 16.6% and 13.6%, respectively.

The net present value of the 100 Residential Townhouses, 10,000 s.f. Marina Retail, and 104 slip Marina reuse is $772,114, as shown on page 166.

d. Parcel Three - Office, HoteUConference Center, Marina

CPL assumes that the marina site would be sold in 1998 for $76,960 ($20,800/acre), the Hotel/Conference Center site would be sold in 1999 for $519,168 ($21,632/acre), 37,800 s.f. of office space would be leased in 2000, and 51,400 s.f. in 2001. Construction costs of$3,269,700 in 1999 and $4,860,000 in 2000 are included.

Lease rates are projected at $11.20-$11.60 s.f., triple net. Vacant land expenses are carried for 3 months in 1997, and decline as the office buildings are leased.

Again, the analysis assumes a theoretical sale in 2005, based on the net income in 2006, including a stabilized vacancy rate of 10.0%. The resulting net income in 2006, $997,704, is then capitalized at 15.0% and sale costs of 6% are deducted. This generates net sales proceeds in 2005 of $6,252,281. Cash flows are then discounted at 12.0% to arrive at a net present value.

The net present value of the site, with the marina and hotel sites sold as development parcels and two office buildings developed, leased and then sold, is ($562,061) as shown on page 167.

CPL also analyzed selling the office development parcels in 2000 for $134,984 ($ 16,873/acre) assuming a direct sale to a user or users who would develop the office space for their own use.

Again, cash flows are then discounted at 12.0% to arrive at a net present value, and an additional 25% discount is applied to reflect a developer's profit. The IRR and FMRR are 28.45% and 21.25%, respectively.

The net present value of the site with all three development parcels sold to users is $385,094, as shown on page 168.

As such, the only feasible redevelopment option for Parcel Three is to identify users for the parcels, not developers.

172

e. Parcel Four - Nature Preserve

CPL assumes that this parcel will remain undeveloped for the projected period, and no value is assigned. It is expected that the parcel will remain the property of the City of St. Joseph.

f. Parcel Five - Industrial

CPL assumes that 100,000 s.f. is developed and leased annually, beginning in 1999 through 2005. Construction costs ranging from $26.00/s.f. to $32.90/s.f., incurred in the year prior to lease, are included.

Lease rates are projected at $3.00/s.f. - $3 .60/s.f., triple net. Vacant land expenses are carried for 3 months in 1997, and decline as the industrial buildings are leased.

Again, the analysis assumes a theoretical sale in 2005, based on the net income in 2006, including a stabilized vacancy of 10.0%. The resulting net income in 2006, $2,065,300, is then capitalized at 15.0% and sale costs of 6% are deducted. Cash flows are then discounted at 12.0% to arrive at a net present value.

The net present value of the site is ($3,337,614), as shown on page 169.

CPL also analyzed selling industrial parcels, assuming direct sales to users over a six year period, beginning in 1998 through 2003, at prices ranging from $2,080/acre to $2,531/acre.

Again, cash flows are then discounted at 12.0% to arrive at a net present value, and an additional 25% discount is applied to reflect a developer's profit. The IRR and FMRR are 14.87% and 13 .12%, respectively.

The net present value of this approach is $20,133, as shown on page 170.

Therefore, the only feasible industrial redevelopment of Parcel Five is the sale of lots to users, not developers.

g. Parcel Five - Commercial Port Facility

The Port facility is expected to be completed jointly by the state, the county, the cities, and Cornerstone Alliance, and no value is assigned. It is expected that the parcel will be assembled, developed, and managed by the public sector in support of economic development.

173

As shown in Exhibit 6-7, the net present values of the reuses for the study properties, based on the assumptions outlined above, range from ($2,492,492) to $1,812,410.

Exhibit 6-7 St. JosephfBenton Harbor Properties Net Present Value of Reuses

Reuse Parcel One North Parcel One South Parcel Two Parcel Three Parcel Four Parcel Five-Industrial Parcel Five - Port

Net Present Value $316,863 $318,206 $772,114

($562,061) - $385,094 -0-

($3,337,614) - $20,133 -0-

($2,492,492) - $1,812,410

This range of values, combined with the market information range of values, suggests a maximum value of approximately $1.9 million.

5. Summary

Given the projected construction costs, the financial assumptions, the lease rates and the lease up period as outlined in this report, redevelopment of the properties for the proposed uses is feasible under certain conditions. Parcels One and Two are feasible redevelopment projects for third party private developers under the redevelopment scenarios outlined herein. Parcels Three and Five are feasible redevelopment projects only if users are secured to purchase the land and develop it for their own use (i.e. hotel company, office user, or industrial user).

While the net present values would equate to a sale price for the properties, it may not necessarily result in an all-cash sale at that price since financing for speculative real estate acquisitions is difficult to obtain in today's financial marketplace. It is realistic to expect that some seller financing would be required to achieve this value. Alternatively, the investor/developer may have to finance the acquisition with private capital, which carries much higher interest rates than does traditional bank or institutional financing. This would lower the price an investor/developer could pay for the property.

The redevelopment analysis assumes that the multiple privately owned parcels will be controlled by a single entity for purposes of negotiation and disposition for redevelopment. The values attributed to the various parcels assume that the sites are delivered free of environmental remediation requirements.

The development plan requires public investments in environmental cleanup, infrastructure, road improvements, and the port facility. It is hoped that environmental cleanup, infrastructure, and road improvements can be funded with federal and state monies, and that the port facility can be funded with state, county, and local funds.

As such, the recommended development program is feasible only if these certain project costs are funded outside of the private development project. The undetermined cost of environmental cleanup of the site would need to be financed entirely by outside sources. Road improvement costs to bring Michigan Highway M-63 down to grade north of the railroad line and rebuild the Klock Road interchange would also have to be funded by external sources such as the State Highway Department. With a few minor exceptions,

174

the balance of the land development program can be carried by the project, including substantial shore line improvements and the costs to construct the marina and recreational amenities.

The cities of St. Joseph and Benton Harbor will benefit from the project in many ways. Economic development benefits include job generation and tax base expansion. Also important will be the psychological benefit and increased confidence in the local economy from having seen derelict properties on a prominent and highly visible site at the community's waterfront entrance redeveloped to an active mixed-use project.

These development projects will have a significant impact in stimulating confidence in other development and pent-up investments. In addition, investments will occur in existing businesses in order to provide materials and services to these projects during the construction period and during operation. These investments will result in new businesses and expansions locally that will, in tum, produce increased tax flows.

Direct employment benefits are estimated from 400 to 800 construction related jobs associated with all site development and construction activities during the project period. Permanent on-site employment created by the project is estimated to be 1,460 jobs, as shown in Exhibit 6-8, of which as many as 1,000 jobs could be oriented towards unskilled and semiskilled labor, service and support jobs, and clerical and administrative categories.

Exhibit 6-8 New Jobs

Industrial Office Rec. Complex Marina Retail Residential

Total # of

S.F.lUnits Emp\. 700,000 s.f. 700

# Emp\. St.

Joseph

136,800 s.f. 550 550 300,000 s.f. 50 50

188 slips 10 \0 63,500 s.f. 125 125

# Emp\. Benton Harbor

700

210 units 25 25 --~1-,4~6~0----~76~0~--~7~00~

Local governments in Michigan derive the vast majority of their tax revenues associated with real estate development projects from real and personal property taxes. Increases in the resident population as a result of development also result in increases in the percentage of tax rebates which Michigan municipalities receive from the State. The primary source of these taxes are sales, income and single business taxes.

Property tax benefits to the cities have been estimated using the 1996-1997 portion of the taxes which goes to the cities' operating budget, or 16.96 mills for St. Joseph and 28.67 mills for Benton Harbor.

175

. ,

Exhibit 6-9 summarizes the net annual property tax benefits to the cities.

Exhibit 6-9 Annual PrQpert~ Tax Benefits Cities of St. Joseph and Benton Harbor

Average Total 50% Millage Property St. Joseph # of Units Value Value Assessment Rate Tax Parcel One

Residential 110 $125 ,000 $13 ,750,000 $6,875,000 0.01696 S116,600 Retail 7,500 60 450,000 225,000 0.01696 3,816 Office/Retail 90,000 70 6,300,000 3,150,000 0.01696 53,424 Recreation 300,000 75 22,500,000 11,250,000 0.01696 190,800

Parcel Two Marina Bldg. 10,000 60 600,000 300,000 0.01696 5,088 Marina Slips 104 15,000 1,560,000 780,000 0.01696 13 ,229 Residential 100 262,500 26,250,000 13,125,000 0.01696 222,600

Parcel Three Hotel 200 90,000 18,000,000 9,000,000 0.01696 152,640 Office 91 ,800 80 7,344,000 3,672,000 0.01696 62,277 Marina Bldg. 1,000 60 60,000 30,000 0.01696 509 Marina Slips 88 15,000 1,320,000 660,000 0.01696 11 , 194

Parcel Four Undeveloped Total St. Joseph $98,134,000 $49,067,000 $832,176

Approximate Current Taxes Generated $36.285

Net Increase: St. Joseph $795 ,891

Benton HarbQr Parcel Five

Industrial 700,000 25 17,500,000 8,750,000 0.02867 $250,863 Total Benton Harbor 17,500,000 8,750,000 S250,863

Approximate Current Taxes Generated $27.647

Net Increase: Benton Harbor S223.216 Total: St. Joseph & Benton Harbor $115,634,000 $57,817,000 $1,019,107

The net annual property tax benefits to the cities are projected at approximately $800,000 for St. Joseph and $225,000 for Benton Harbor.

Therefore, the cities could commit up to $1.0 million annually of future incremental property tax receipts in this development as a means to generate the economic development and increased employment which the projects represent.

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.• :J •.• "",.~,..,

SECTION VII: REDEVELOPMENT AND DISPOSITION ALTERNATIVES AND RECOMMENDA TIONS

A. ISSUES AFFECTING PROPERTY REDEVELOPMENT

Redevelopment of the study properties must respond to current economic, demographic, and market conditions in the area. Over the last twenty years, manufacturing plants have been closed, jobs have been lost, people have moved away from the area, population has declined, and economic stagnation has occurred. Without substantial public and private investment in the area's economic and market infrastructure, continued stagnation is likely.

The St. Joseph properties offer a good opportunity for a mixed-use residential, commercial, and recreational waterfront development. The properties have good waterfront and transportation access, Renaissance Zone designation of a portion of the properties, and Whirlpool's continued commitment to the area.

The Benton Harbor properties offer a good opportunity for a quality industrial and commercial redevelopment project. The existing infrastructure, the Renaissance Zone designation, the availability of rail, and the potential for commercial port access all support industrial redevelopment of the Graham A venue area. The character of the West Main Street corridor will support commercial and retail redevelopment, provided economic growth occurs in the area.

However, none of the projects will be successful without the coordinated attention of public and private leaders, the commitment of the surrounding communities to the overall redevelopment plan, and the allocation of local, regional, state, and federal financial resources.

Implementation of any proposed redevelopment projects requires coordinated, aggressive, and sustained action by the public and private sectors. Issues which need to be addressed prior to proceeding with any redevelopment are presented below. Some of these are recurring themes which have been raised by previous studies; highlighted at the March 10-11, 1997 workshop conducted by Cornerstone Alliance and the Great Lakes Environmental Finance Center (GLEFC); included in prior Cornerstone Alliance redevelopment efforts; or mentioned by various private organizations and community groups.

1. Regional Commitment To Redevelopment Plan Concept

Public and private leadership should agree on the redevelopment plan for the St. Joseph and Benton Harbor properties and publicly endorse its implementation. Consensus and support of the general public should be achieved on the overall development concept, including the redevelopment of the Business Loop 1-94 corridor. Any necessary zoning changes should be implemented.

The communities surrounding St. Joseph and Benton Harbor should be involved and committed to the project, as the proposed redevelopment will benefit not only St. Joseph and Benton Harbor, but the surrounding region as well.

A well organized regional marketing and promotion program should be implemented to promote the redevelopment and attract residents, businesses and visitors.

177

2. Regional Development Authority

The successful redevelopment of the study sites depends upon the cities' abilities to create a long-term vision and master plan for regional revitalization. The creation of a redevelopment authority as a means to spur regional redevelopment with coordinated planning and investment guidelines would provide a framework for municipal cooperation and reduce the need for constant consensus-building among multiple municipalities with potentially conflicting needs and goals. As recommended in the GLEFC workshop, the steps to accomplish the creation of a regional development authority are as follows:

• Build consensus around the need for a new Authority. The initial mission of this new quasi-governmental agency should be to direct, coordinate, and finance redevelopment activities within the Corridor for Development. It should create regional development strategies, focus on the economic issues of the entire area, and have a Board of Directors comprised of representatives from all seven local units of government as well as the public at large.

• Seek state approval for statutory authorities. The Authority will need bonding and eminent domain powers.

• Utilize existing funding sources and commitments to capitalize the new agency. Pool needed resources to invest in targeted development opportunities. Cornerstone Alliance indicated a willingness to seed the startup of the Regional Development authority with private sector funds. This money should be used to challenge the local municipalities for matching contributions.

• Develop an integrated land use plan, using the Corridor for Development as the foundation. The Authority will need a widely-accepted community redevelopment plan to guide its activities, which would be a mutually agreed-upon general framework to guide and prioritize development decisions.

• Explore a property tax equalization mechanism such as a "fiscal disparities fund" or tax-base sharing.

• Develop a variety of financial offerings.

• Improve workforce and job readiness programs, including local hire requirements for companies which benefit from economic development incentives and programs. Address workforce preparedness issues to ensure a strong regional labor market attractive to new and existing employers.

• Implement a plan to prepare local residents for entry level manufacturing and service jobs.

3. Site Control

Presently, there are approximately 159 individual parcels within the study area, with as many individual property owners. It is imperative to the successful redevelopment of the study area that one entity control the redevelopment and disposition of the mUltiple properties. A Redevelopment Authority would be an appropriate entity to invest control of the redevelopment. The acquisition of property by donation, acquisition, or eminent domain could be accomplished by the Authority.

178

,r'- -. ,,,_ .~

Control of the entire study area by one entity will provide the following benefits:

• Negotiations with private developers will be facilitated . Developers will be more likely to pursue potential development opportunities if they know that they only have to deal with a single entity, rather than a multitude of individual property owners.

• A single entity will promote developer confidence in community support for the project.

• Negotiations with federal, state, local, and private organizations for funding, permitting, or other approvals will be easier to coordinate.

4. Redevelopment Phasing

The phasing of development should take advantage of existing opportunities such as available utilities and infrastructure, access, market strengths, and economic development incentives such as the Renaissance Zone designations.

The redevelopment plan for both the St. Joseph and Benton Harbor properties takes advantage of the Renaissance Zones as much as possible. In St. Joseph, a portion of the Recreation Sports Complex, three of the six office/retail buildings, and fourteen of the 110 residential lots have been located to take advantage of the Zone. Similarly, most of the new industrial buildings in the Graham A venue area of Benton Harbor are located within the Zone.

Redevelopment activities should occur first within the Renaissance Zones as an additional incentive for those initial uses. Activity on the sites needs to be generated to further spur investment and development in the area, and the most obvious locations are the most visible - the existing waterfronts and streetfronts.

Finally, outside interest needs to be generated for the area. This will be accomplished through the combination of expanded marina and recreational boating opportunities included in the redevelopment plan, but the largest regional draw is expected to be generated by the Recreation Sports Complex.

a. St. Joseph

The development schedule for the St. Joseph properties should prioritize development as follows :

i. West Marina

The market will support the proposed 104 slip marina and 10,000 s.f. marina support building. The completed marina will generate activity and bring more people over to the site.

ii. Recreation Sports Complex (RSC)

This building should be designed so as to allow phased construction of the various components as the market develops. Initially, two ice rinks and an in-line hockey rink (which can also be used for indoor soccer) are proposed and located in the Renaissance Zone, together with the necessary locker rooms, administration, and pro shop facilities. As the facility's popularity grows, construction of additional components such as a fitness

179

center, golfing and batting cages, indoor soccer, basketball, tennis, volleyball, or other sports activities can be accomplished.

The RSC is expected to be a popular regional attraction, and will further spur interest in the redevelopment area. Preliminary interest has been expressed from several developers. A developer or development group should be identified and chosen as soon as possible, with the target date for completion of the first phase of the facility in the Fall of 1998.

Access to the RSC will initially be accomplished via the existing Upton Road and Klock Road exits offM-63, which lead to the new access road off of Upton Drive (which would connect directly with M-63 when M-63 is reconstructed and brought to grade) .

iii. Waterfront Townhouses

Contingent upon negotiations with the DOT to relocate the Upton Drive ramps, construction of the first 15 townhouses should be completed as soon as possible. The attraction of a waterfront home with the potential for a boat slip will attract both second home and primary home buyers, and will create additional activity in the area. Additional townhouses should be constructed as the demand dictates.

iv. Residential Subdivision

Development of the residential lots proposed for the north portion of the St. Joseph site should also be initiated as quickly as possible to take advantage of the Renaissance Zone benefits and to further anchor the redevelopment of the area. The twelve lots which are located in the Zone, and the associated roadway improvements, should be completed immediately.

Further development of the proposed pond and open space, and the additional lots, should be accomplished as the market demand warrants.

v. OfficelRetaii

Once the residential and RSC components of Parcels One and Two have been established, the first two 15,000 s.f. office/retail buildings should be developed. Demand for the office and retail services will be generated from the existing as well as the new residential areas surrounding the site, and the visitors to the RSC.

Development of the future office/retail buildings should occur in conjunction with future residential and RSC construction.

vi. HoteUConference Center

The hotel/conference center will require extensive infrastructure work to bring utilities to the site. A developer/operator should be chosen as quickly as possible, with the target date for completion of the facility in the Fall of2000.

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vii. East Marina

The east marina will be more expensive to develop than the west marina, as it is excavated from existing land. It should be completed only after commitment of the hotel/conference center and in conjunction with the infrastructure work necessary for the hotel facility.

viii. Office Buildings

The office building sites should be promoted to potential users throughout the development period. However, it is most likely that a commitment will be achieved only after the other components of the redevelopment are at least partially completed, and the hotel/conference center facility is fully operational.

b. Benton Harbor

The development schedule for the Benton Harbor properties should prioritize development as follows:

I. Superior SteeU1\1alleable Steel Properties

These properties should be acquired and demolished, and the sites prepared for redevelopment. Once this is accomplished, and the unsightly and derelict structures no longer present the negative image they currently project, users will be more likely to purchase development sites. The primary focus for redevelopment in the Graham A venue area should be those properties within the Renaissance Zone.

ii. Rebuild Graham Avenue

Graham Avenue should be reconstructed and should connect to Riverview Drive, via and at-grade crossing of the CSX railroad tracks. This will reinforce the perception of revitalization in the area, and promote access to and development of the Port Facility.

iii. Port Facility

Contingent upon negotiations with Federal, state and county funding sources, an initial facility should be developed which will accommodate several barges along the existing ship canal frontage. As demand increases, application can be made for extension of the Federal Navigation Project limits to include dredging up the Paw Paw River as far as the CSX railroad bridge. This would allow additional barges along the Paw Paw River side of the facility. Finally, a rail siding should be extended to the facility, as well as completion of loading, unloading, and storage areas.

iv. CSX Properties

Negotiations with CSX for control of their properties within the Renaissance Zone should be completed, and these properties should be made available to companies looking to purchase and develop facilities within the Zone.

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v. Klock Road ParcelslEighth Street Bridge

The two proposed buildings on Klock Road and outside of the Renaissance Zone are anticipated to be developed privately in the future, as demand dictates. The parcels are currently unimproved fields and woods and do not present a visual or psychological impediment to redevelopment in the area, unlike the former foundry properties.

Finally, once all of the proposed redevelopment nears completion, the capacity of the existing Graham AvenuelNorth Shore DrivelKlock Road travel corridor can be studied to decide whether an alternate route over a reconstructed Eighth Street bridge is necessary to relieve some of the traffic using the Graham A venuelNorth Shore Drive and the North Shore Drive/Klock Road intersections.

vi. 'Vest Main Street

Future redevelopment of West Main Street will rely in part on the successful redevelopment of the Graham A venue area as well as the St. Joseph redevelopment, and their associated job development. Increased overall economic vitality will spur redevelopment of the historic commercial and retail core in Benton Harbor. Redevelopment of some of the existing office/retail buildings, as well as new development along West Main Street will dramatically improve the city's regional image and should be encouraged through the use of public financial incentives.

5. Funding

As discussed previously, the redevelopment of the study area will require external funding, as the net present values of many of the parcels do not support the necessary investment in environmental remediation, infrastructure improvements, or even, in some cases, site acquisition.

However, the benefits of increases to the tax base, new jobs, and a revitalized economy justify public, quasi-public, private foundation, and private investment in the redevelopment. It is anticipated that DEQ funds will be available for environmental remediation; that DOT funds will be available for roadway improvements; that DNR funds will be available for recreational and waterfront improvements; and that traditional federal, state and local funding sources will be utilized in support of the project. Specific funding sources that may be utilized in the redevelopment include: • Community Development Block Grants; • Tax Increment Financing; • City Bonds (General Obligation or Revenue); • Tax Incentives and Abatement Programs; • Section 108 Loans; • Small Business Administration Loans and Guarantees; • Special Grants and Appropriations from State and Federal agencies, the County, the

business community, and private foundations; • State of Michigan Environmental Protection Bond Implementation Act; • Debt Financing; • Equity Investments; • Real Estate Loan Guarantees; • Working Capital Loans; and • Brownfield Site Assessment Grants.

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6. Environmental

The environmental status of the entire study area is undocumented, although the DEQ is completing a thorough site investigation and characterization of the former Auto Specialties site. Redevelopment will require complete environmental information for all of the properties and agreement with the DEQ prior to any redevelopment activities.

CPL recommends that complete environmental information and testing of the buildings and land be completed to determine what, if any, environmental liability exists. If contamination is present, plans to either clean the contamination to acceptable levels or, if appropriate, indemnify the buyer against future liability related to the contamination must be developed and implemented.

Finally, a "No Further Action" letter from the state will be required for redevelopment to proceed. The existing Michigan Department of Environmental Quality and Whirlpool assessments can be used to expedite this negotiation for the St. Joseph properties, and similar assessments will be necessary for the Benton Harbor properties.

7. Recommended Action Plan

In order to move forward with the redevelopment of the properties, the following actions are recommended:

a. Promote the Redevelopment Plan to both public and private sector leaders. b. Finalize community and regional support for the Redevelopment Plan,

including the Corridor for Development Plan. c. Implement required zoning changes. d. Create Regional Development Authority. e. Identify and pursue project funding sources. f. Gain control of the redevelopment properties. g. Initiate a process to attract local, national and international developers. h. Initiate a comprehensive marketing program promoting the residential,

commercial, and industriallocational and economic advantages of the redevelopment areas as well as the region.

1. Monitor and bring to closure with DEQ the environmental requirements for redevelopment.

J. Secure a "No Further Action" from DEQ for the entire redevelopment area.

k. Secure a release of the $4.0 million lien on the former Auto Specialties site.

1. Complete negotiations with the DOT regarding state roadway improvements, including relocation of Upton Drive connector ramps, rebuilding Klock Road interchange, and lowering M-63.

B. DISPOSITION ALTERNATIVES

There are six alternative methods to achieve the disposition and redevelopment of the properties, once the site control, environmental, and funding issues are resolved. A summary of the alternatives and CPL's recommendation for achieving the disposition and redevelopment of the properties are presented in this section .

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1. Redevelopment Of The Properties And Sale At Stabilized Occupancy

Under this disposition alternative, a single development entity, such as the Redevelopment Authority discussed previously, would assume the costs of redeveloping, managing, and marketing the properties until sold.

The total construction costs of achieving the proposed reuses as described in Section VI is estimated at $50.0 - $60.0 million, not including environmental and infrastructure costs. The total net present values range from ($2,492,492) to $1 ,812,410, based on a 15.0% capitalization rate and a 12.0% discount rate.

Any of the redevelopment projects could be pursued by a Redevelopment Authority to achieve the highest long term disposition value upon ultimate sale of the properties.

The risks to this approach are several. The properties could cost more to redevelop than estimated or take longer to sell than expected, and the market could change, either increasing or decreasing the marketability of the properties. Moreover, the Redevelopment Authority would be exposed to these risks until the properties sold, and Redevelopment Authority personnel would be required to oversee the projects. This could take se'veral years, depending on the length of time it takes to redevelop and sell the properties.

Although this disposition alternative potentially represents the highest long term return, it also represents a long term commitment of funds and personnel, is the highest risk disposition alternative, and is not recommended by CPL.

2. Minimum Bid Auction

A minimum bid auction is the fastest alternative to property disposition other than an absolute sale auction. Under this approach, a minimum price is established, an auction date is set, sale documents, promotional, and informational materials are distributed to potential bidders, the auction is advertised, and a high bidder is identified on the auction date. Immediately thereafter, sale documents are executed by the high bidder and the seller which detail the terms, conditions, and date of closing.

The costs would include promotional and advertising expenses; preparation, compilation, and distribution of all pertinent property information and sale documents to prospective bidders; arrangements for bidder inspection tours; contracting for an auctioneer, an auction location, and auction associated arrangements; bidder qualification analyses; and the legal and marketing fees .

The risks to this approach are several. The expenses associated with preparing for an auction do not guarantee that the minimum bid will be met or that there will be any bids.

Setting the price too high is a risk, and setting the minimum bid at a lower figure still does not guarantee a sale and risks disposition of the property at a deeply discounted pnce.

Once an auction is publicized, the property is assumed by the market to be distressed, further hindering alternative marketing approaches if the auction is unsuccessful.

Although this is the fastest disposition alternative, it does not guarantee a return and is not recommended by CPL.

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3. Targeted Marketing And Brokerage

The targeted marketing and brokerage sales approach is the disposition strategy which could take the longest time, other than redeveloping and selling the properties, but is the most appropriate strategy for disposition of the properties. Under this approach, a broker is hired to market the property, an asking price is established, the property is advertised, sale documents, promotional, and informational materials are distributed to potential buyers, and a final disposition agreement is negotiated.

The risks to this approach are several. The marketing expenses committed to the sale effort do not guarantee that a buyer will be found. Again, setting the asking price does not guarantee a sale and risks disposition of the property at a discounted price if set too low; and risks lack of activity and continued carrying costs if the asking price is set too high. Additionally, market conditions may, or may not, deteriorate over the marketing period.

The benefit of the targeted marketing approach versus the auction approach is that the seller maintains control of the process. If a buyer' s offer is too low, the seller has the option of rejecting the offer and continuing the marketing effort, negotiating for a higher price, or accepting the offer.

Once a buyer is identified and terms are agreed on, a due diligence period for the buyer to conduct studies, prepare plans, secure required permits and approvals, and to secure financing should be expected. In some cases, this period can be six to nine months.

This is the slowest shorter term disposition alternative, but it does represent a method for controlling the sale price and terms under uncertain market conditions, thereby achieving the highest shorter term achievable sale price.

The costs would include minimal promotional and advertising costs; compilation and distribution of all pertinent property information to prospective bidders; and arrangements for bidder inspection tours (estimated at $25,000); bid analyses; and the marketing fee.

The sale would take approximately eight to twelve months to accomplish, assuming no serious environmental issues are discovered. This disposition alternative presents some risk, but it also has the highest potential value for a short term sale.

4. "Request For Proposals" Bid-Type Sale Of The Property

Because there is some activity in the area residential market, a Request For Proposals (RFP) process would be another appropriate way to sell the properties planned for residential development quickly, other than a Minimum Bid Auction. Under the RFP approach, an asking price is established, sale documents, promotional, and informational materials are distributed to potential buyers in a Request for Proposals format, and the property is advertised.

The RFP sets a date for bidders to submit "last and final" bids. Once the final bids are received, the seller can then negotiate with the top three bidders, accept an offer, or reject all offers.

The risks to this approach are less than either the auction or targeted marketing approaches. Although the marketing expenses committed to the RFP effort do not guarantee that a buyer will be found, the seller is not exposed to an indefinite marketing

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period. Again, setting the asking price does not guarantee a sale and risks disposition of the property at a discounted price if set too low, but the risks due to lack of activity and continued carrying costs are minimized by setting a date certain for all final bids. Additionally, if the RFP effort is successful, the seller is not exposed to possible deteriorating market conditions, as the RFP process is typically only 2 to 3 months between initiation and final bid date.

The seller maintains control of the process, as in the standard marketing approach. If all bids received are too low, the seller has the option of rejecting the offers and beginning a standard marketing effort, negotiating with one or more of the bidders for a higher price, or accepting a bid.

Once a buyer is identified and terms are agreed on, a due diligence period should be expected. However, because the buyers have undertaken some of the planning and analysis prior to submission of their bid, the due diligence period will not be longer than ninety days.

The RFP process allows developers and users to determine the best reuse of the property by their ultimate valuations and bids for the property. In this way, the sellers can be assured that the sale price was the highest achievable within the time period.

This disposition method presents a large amount of risk if the RFP process fails to produce a buyer, but it also has the highest potential value for a short term sale if successful.

Parcels One and Two are good candidates for an RFP-type disposition, as they have readily determinable redevelopment potential. However, the RFP process may not achieve the highest possible disposition value.

5. Donation Of The Properties

As an alternative to selling, the private landowners can donate property to a suitable taxexempt organization. The benefit of this approach is that the landowners can deduct up to 10% of their taxable income each year (for up to 5 years) until the total deductions equal the qualified appraised value of the donated property.

The costs in this case would include compilation and distribution of all pertinent property information to prospective tax-exempt organizations; and arrangements for inspections (estimated at $5,000); an appraisal fee (estimated at $3,000-$10,000 per property); a fee to the tax-exempt organization (estimated at $25,000); closing costs (estimated at $5,000); and the marketing fee.

The risk to this approach is that an appraisal will be required, as a donation requires an appraisal of the property within 60 days of the date of donation. The appraisal will cost approximately $3,000-$10,000 per property, and may not generate the value necessary to produce a higher return to the property owners than the recommended disposition alternative.

6. Bargain Sale And Donation Of The Property

This alternative combines the benefits of a donation with the RFP-type sale of the property. In essence, an appropriate tax-exempt organization is identified, an agreement is structured with the organization, a buyer is identified through an RFP-type marketing program and a sale price is negotiated. The sale proceeds, after deducting the property

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owner's adjusted tax basis and the sales and donation costs, are then subject to the corporate or personal tax rate, depending on the type of ownership. The difference between the sale price and the appraised value is considered a donation, and can be deducted as described previously.

This alternative allows property owners the tax benefits of a donation insofar as the appraised value exceeds the ultimate sale price. In this way, the owners can be assured that the combined property disposition value is the highest achievable within the time period. Again, the costs to achieve the bargain sale/donation will reduce the proceeds, but similar costs would be incurred if the property were simply sold.

A Bargain Sale and Donation of several of the larger parcels may generate the highest value.

The costs would include minimal promotional and advertising expenses (estimated at $25,000); compilation and distribution of all pertinent property information to prospective bidders and tax-exempt organizations; arrangements for bidder inspection tours; bid analyses; an appraisal fee (estimated at $3,000-$10,000 per property); a fee to the tax-exempt organization (estimated at $25,000); closing costs (estimated at $5 ,000); and the marketing fee.

The sale would take approximately eight to twelve months to accomplish, assuming no serious environmental issues surface. This disposition alternative presents some risk, but it also has the highest potential disposition value for a short term sale of a few of the parcels.

C. DISPOSITION RECOMMENDATION

CPL recognizes the Minimum Bid Auction process as the fastest disposition method, but recommends the Targeted Marketing And Brokerage process as the best method to achieve the highest value and most appropriate developers for the properties. Additionally, the Donation or the Bargain Sale and Donation process should be explored with a few of the larger property owners as the best method to achieve the highest disposition values. CPL is prepared to implement the dispositions upon approval by the appropriate parties.

If the property owners wish to maximize the short term value and dispose of the properties quickly with as little risk as possible. CPL recommends that a Targeted Marketing and Brokerage approach be pursued. Although redevelopment by the propertv owners could represent a higher disposition value. the investment. leasing. timing. and market risks could erode the difference substantially. In addition. the financial and personnel resources necessary to achieve a redevelopment of the propertv would further erode any additional value.

If one or more of the property owners choose not to pursue the Targeted Marketing and Brokerage alternative. CPL recommends pursuing disposition via the Bargain Sale and Donation process. Finally. if the Bargain Sale and Donation cannot be accomplished then CPL recommends pursuing the disposition by Donation. A donation guarantees a disposition value and minimizes the property owner's risk and degree of involvement.

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D. IMPLEMENTATION OF THE DISPOSITION RECOMMENDATION

Depending on the chosen course of action, CPL will undertake to either dispose of the properties through a Targeted Marketing and Brokerage, Bargain Sale and Donation, Request For Proposals, or Donation process. The steps to implement these alternatives are outlined below.

1. Market Property For Sale Through Either A Targeted Marketing and Brokerage Or Request For Proposals Process

a. Present Materials To Qualified Investors And Developers

CPL will actively market the property. We will utilize the research, analysis, and financial projections contained in this report to the benefit of the property owners throughout the marketing process.

b. Conduct Property Inspection Tours For Prospective Buyers

CPL will organize and conduct property inspection tours for all interested buyers.

c. Receive And Analyze Buyer Submissions

CPL will assemble and review all bids, request clarifications and additional qualifications if necessary, analyze the financial implications, and present the bids with a recommendation.

d. Negotiate Final Sales Agreement With Buyer

CPL will negotiate the final sales agreement on the property owner's behalf and oversee completion of the sale of the properties.

2. Bargain SalefDonation

If a bargain sale and donation of selected properties is elected, CPL will act on the property owner's behalf to manage the process, as outlined below.

a. Interview And Select Appraiser

CPL will interview, select, and supervise a qualified appraiser to generate the highest possible value of the property.

b. Identify A Tax-Exempt Organization And Complete The Donation

CPL will actively solicit interest from appropriate organizations. This must happen concurrently with the appraisal and prior to the marketing processes.

Once an appropriate organization is identified, CPL will complete the donation and sale of the property.

c. Present Materials To Qualified Investors And Developers

Simultaneously, CPL will actively market the property. We will utilize the research, analysis, and financial projections contained in this report to the benefit of Oak throughout the marketing process .

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d. Conduct Property Inspection Tours FQr Prospective Buyers

CPL will organize and conduct property inspection tours for all interested buyers.

e. Receive And Analyze Buyer Submissions

CPL will assemble and review all bids, request clarifications and additional qualifications if necessary, analyze the financial implications, and present the bids with a recommendation.

f. Negotiate Final Sales Agreement With Buyer

CPL will negotiate the final sales agreement.

3. Donation Of The Property

If a donation of any of the properties is elected, CPL will manage the donation process, as outlined below.

a. Interview And Select Appraiser

CPL will interview, select, and supervise a qualified appraiser to generate the highest possible value of the property.

b. Identify A Tax-Exempt Organization And Complete The Donation

CPL will actively solicit interest from appropriate organizations. This can happen concurrently with the appraisal process.

Once an appropriate organization is identified, CPL will complete the donation transaction.

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corporate properties study benton harbor/st. joseph part ii

Documents

joseph property

joseph study area

joseph east

joseph rivers

joseph rier

adjacent tothe paw paw

thepaw paw river

benton harbor property