Former Y Lot: Sold to Dahlmann for $5.25M

The Ann Arbor city council has approved the sale of city-owned property downtown – a parcel north of William Street between Fourth and Fifth avenues – to Dennis Dahlmann for $5.25 million. Council action approving the sale came at its Nov. 18, 2013 meeting at about 1:20 a.m.

The council had voted on Nov. 7 to direct the city administrator, Steve Powers, to negotiate with Dahlmann for the sale of the land and to present a sales agreement for approval on Nov. 18, which Powers did. The Nov. 7 resolution was amended during the meeting to impose various conditions to ensure eventual development of the property. Those conditions were ensconced in a rider document attached to the sales agreement. [.pdf of rider document]

Dahlmann had offered $5.25 million for the property, known as the Y lot. It had been listed at $4.2 million.

The city purchased the property for $3.5 million 10 years ago and has been making interest-only payments on the property for that time. A balloon payment is due at the end of this year. [.pdf of Dahlmann offer 10.17.13]

At its Nov. 18 meeting, the council did not delve into the question of how the net proceeds of the sale would be defined, but some councilmembers indicated they were pleased that the result would be a deposit into the city’s affordable housing trust fund. A year ago at the council’s Oct. 15, 2012 meeting, the council adopted a resolution that indicated the proceeds of the sale would:

“… first be utilized to repay the various funds that expended resources on the property, including but not limited to due diligence, closing of the site and relocation and support of its previous tenants, after which any remaining proceeds be allocated and distributed to the Affordable Housing Trust Fund …

It was not clear until mid-afternoon on Nov. 18 that Powers would be able to comply with the Nov. 7 council directive – to provide a sales agreement for the council’s consideration at the Nov. 18 meeting. In emails to councilmembers spaced just 14 minutes apart, Powers first indicated that negotiations with Dahlmann were continuing and that he didn’t expect to have a sales agreement ready for that night’s meeting (3:41 p.m.) and then that Dahlmann had agreed to all the city’s terms (3:55 p.m.). City attorneys were preparing the sales agreement, Powers wrote in the later email, and Powers expected it to be ready for consideration at that evening’s meeting.

The terms to which Dahlmann agreed were specified in the Nov. 7 council direction. The original resolution directed the inclusion of a provision to ensure eventual development of the site. But during the Nov. 7 deliberations, Christopher Taylor (Ward 3) put forward amendments that were far more detailed about how protection against non-development was to be achieved. Those amendments were adopted by the council as part of the direction to the administrator. [.pdf of Taylor's amendments.]

Taylor’s amendments included a minimum 400% floor area ratio (FAR) including mixed use on the bottom floor, office space on the mid-floors and residential on the top floors. The deadline for building something is January 2018. There’s a prohibition against sale to another third party except that the city has a right of first refusal. The amendments also gave direction on requirements for energy efficiency and a required conversation with the Ann Arbor Area Transportation Authority, which operates the Blake Transit Center next door to the parcel.

If negotiations with Dahlmann had not been successful, then the Nov. 7 resolution directed the city administrator to negotiate with CA Ventures (Clark Street Holdings). CA Ventures had increased its offer to $5.35 million – but that increased amount was received after the deadline for offers, which was firm and clearly communicated to bidders, according to the city’s broker.

The city received five bids on the property by the Oct. 18 deadline. The city had hired Colliers International and local broker Jim Chaconas to handle the possible sale. [.pdf of summary page by Chaconas]

Deliberations on Nov. 18 lasted only about 10 minutes. Several councilmembers praised Dahlmann’s offer and cited the quality of other properties he owns in Ann Arbor, including the Campus Inn and Bell Tower Hotel. Chuck Warpehoski (Ward 5) said he disliked the idea of Dahlmann’s downtown hotel monopoly, but felt like the council should let the “best bid win.”

This brief was filed from the city council’s chambers on the second floor of city hall, located at 301 E. Huron. A more detailed report will follow: [link]