Avalon Housing: Near North Won’t Work

In a letter sent to Ann Arbor councilmembers and other government officials, Avalon Housing‘s senior developer Michael Appel has announced that the Near North affordable housing project will not move forward. The development team has determined that the project, which was to include 39 new affordable housing units, 16 of them as supportive housing, is not feasible as planned. [.pdf of letter from Michael Appel]

A change to the FEMA flood maps is highlighted in Appel’s letter as a crucial factor in the inability of the project to move forward. The new maps, adopted in 2012, show an expanded floodway, which cuts across the corner of the parcel. That mean that federal funds – part of the project’s financing – could not be used. [1992 FEMA floodway map] [2012 FEMA floodway map]

At the Ann Arbor city council’s Aug. 9, 2012 meeting, city staff indicated that seven existing houses on the proposed building site will be demolished. A fund had been established previously to pay the upfront costs for demolition of nuisance properties, and on Aug. 9 the council authorized contracts with a set of demolition companies to handle such work. Also at the Aug. 9 meeting, community services area administrator Sumedh Bahl said that in 45-60 days from that meeting, the houses would be down – so as soon as Sept. 23.

Appel had addressed the council on Aug. 9 and had already pointed out the FEMA floodmap issue as a major challenge.

The project’s demise will have an (positive) impact on the finances of the Ann Arbor Downtown Development Authority, which had pledged $500,000 to support the project when completed. Of that amount, $100,000 was contingent on the project meeting LEED certification. The DDA board had extended the grant about a year ago at its Sept. 7, 2011 meeting.

It’s now not clear what the future of the site will be. However, Appel’s letter indicates the development team “… will continue to work with local and state government and other partners to explore alternative development options for the site.” The property is owned by Near North Limited Dividend Housing. Avalon Housing had partnered with Three Oaks Group on the project.


  1. By A2Person
    September 1, 2012 at 8:30 am | permalink


    I must say, I’m not sad. Avalon has been successful in providing low-income housing in Ann Arbor precisely because of it’s philosophy of low-density units mixed into established residential areas. This project was precisely the opposite of that, and for that reason I opposed it. I hope that Avalon will continue to provide affordable and subsidized housing in Ann Arbor in their original, successful model, and not try to go big again.

  2. September 1, 2012 at 8:53 am | permalink

    I’m pleased that yet another huge project has bitten the dust (as it were). Here is my “bye bye boondoggle” list of some of the projects that have failed in recent years:

    Near North
    Broadway Village
    Library Lot Conference Center
    The Gallery
    Fuller Road Station
    42 North (twice, apparently)
    William Street Station
    Glen Ann

    What have I missed?

  3. September 1, 2012 at 9:49 am | permalink

    David, Fuller Road Station is not dead, though currently hiding under the sobriquet of “Ann Arbor Railroad Station”.

  4. By Del Dunbar
    September 1, 2012 at 12:00 pm | permalink

    You have missed all of the constructed brick and steel framed buildings that were not financially feasible from day one and later went through foreclosure.

  5. September 1, 2012 at 12:08 pm | permalink

    Right, Del. I was only including those things that were never built.

    What are some of the constructed buildings that later went through foreclosure?

  6. By Tom Whitaker
    September 1, 2012 at 12:11 pm | permalink

    I don’t recall the exact figures, but the real shame here is that there were quite a few very affordable housing units on this stretch of North Main that were boarded up by the developer several years ago, and left to rot, burn, and be looted. I wish they would just cut their losses, tear down the one burned-out house, and the other(s) that are in the floodway, then renovate the remaining houses back to livable condition.

    Perhaps the City could purchase the floodway lots for the Greenway, and provide some storm detention here that, together with additional detention on the old city fleet site across the street, could have a positive impact on the flooding situation along Depot Street. (Which, in turn, would help remove the floodplain issue, if it is an issue, from the current Amtrak site.)

  7. By Bob Martel
    September 1, 2012 at 12:34 pm | permalink

    Hi David, Just about any non-student high-rise building built in Ann Arbor in the past thirty years has gone through the economic ringer. Also, recently one student high rise also went bust (411 Lofts,) I’m sure others will follow in due course. The possible sole exception is Sloan Plaza and that’s because it was sold as residential condominiums so there was no building-wide bankruptcy. The fact remains that prevailing rents do not support the cost of high rise construction in this market. That lenders and investors continue to ignore this is baffling.

  8. September 1, 2012 at 1:45 pm | permalink

    Re (7) More information would be appreciated. Has 411 Lofts been sold? Isn’t this the building with Babo in its first floor?

  9. By John Floyd
    September 2, 2012 at 1:32 am | permalink

    @2 David,

    The Library Lot Conference Center is among the un-dead. DDA is still trying to make this happen, and has paid someone money to look at the existing consultant reports (the ones we have already paid for) to see if there is some way to spin them into a justification for public subsidy.

  10. By Margaret S
    September 2, 2012 at 5:26 am | permalink

    @6 Tom, as a neighbor to this property, I would love nothing more than to see the houses restored to the state they were in just 3 1/2 years ago when all but the most northern home was rented. As a result this fisco, 27 bedrooms of quite affordable housing were lost. Sandi Smith and others have contended from the beginning that this was all sub-standard housing. It was not. Only the 3 houses in the flood way were even in disrepair before 3 Oaks took ownership.

    However, now that real demolition plans are finally in action, I see demolition as the best option. The buildings as they sit now pose a danger to the neighborhood and incidents there are frequent. I have no faith that any of the entities involved (city, Avalon, 3 Oaks) could get a workable renovation plan approved and executed without additional years of delay. The five “good” houses are barely salvageable now.

  11. By Margaret S
    September 2, 2012 at 5:37 am | permalink

    I would like to know how much debt Avalon has taken on in this project. 3 Oaks, the for-profit developer who bought the house at peak rates, no longer owns the properties. A non-profit limited liability partnership took ownership in 2010 and had the properties removed from the tax rolls. This non-profit LLP is made up of two partners – Near North Oaks GP LLC and Near North Avalon, Inc. Each partner is itself an independent, limited liability entity. I don’t know if these entities have any legal or financial ties to Avalon or 3 Oaks. I do know that partnership (Near North LLP) signed and recorded a mortgage from Capital Fund Services in December, 2010 for 2.4 million dollars. Does this mean that 3 Oaks was paid for the land (making a hefty profit from their 1.3 million purchase price) leaving the non-profit entities saddled with all the debt? Have they been making payments on this mortgage since 2010 or are they headed to foreclosure? What does this debt mean for Avalon’s future?

  12. September 2, 2012 at 9:45 am | permalink

    The public interest would be served by a complete explanation of the finances and ownership of Near North. Yes,Ann Arbor Chronicle, this means you!! Since some of the players appear to be willing to “try again” on this property, it would be helpful to know how to analyze any future proposal.

    From what Margaret S. says, there is a complex array of entities involved. This arrangement may be completely standard when tax-funded housing is concerned. Or maybe not. Are these entities tax shelters? What is Capital Fund Services? What is the likelihood that Capital Fund Services will ever see significant mortgage payments now that the project is dead? Are there guarantors for those payments?

    How is he entity commonly known as Avalon Housing organized? Has it been involved in similar transactions in the past?

    I’m looking forward to an intriguing article showing who has done what to whom, and where the ultimate liability lies.

  13. By Margaret S
    September 2, 2012 at 10:17 am | permalink

    @12 David Cahill – Capital Fund Services, Inc. is a non-profit finance company in Michigan that lends money to low income housing projects. They have financed portions of other Avalon projects.

  14. By Jack Eaton
    September 2, 2012 at 12:25 pm | permalink

    Re (2), David, 42 North was approved by Council only once (after being rejected once as a planned project). The collapse of the housing market apparently led to the loss of financing for that project. Another project called The Grove was announced but never proceeded beyond the public participation meetings. We keep track of the various proposals at http://www.southmaple.org

    I would add to your list of failures, the various promised projects for the Georgetown Mall site.

    The difference between the 42 North site and some of these other projects is that the failure to build the 42 North student housing project didn’t leave the site in worse shape than it was in before the project was proposed. Broadway Village, The Gallery, Georgetown and Near North have all had an adverse impact on the surrounding neighborhoods.

  15. September 2, 2012 at 1:07 pm | permalink

    Further items on the “bye bye boondoggle” list:

    Metro 202
    Tierra on Ashley
    Thompson Terrace

  16. September 4, 2012 at 12:01 am | permalink

    One more, Ashley Promenade: [link]

    which was to be built on the Kline’s lot.

  17. September 4, 2012 at 3:29 pm | permalink

    And yet another:

    The Madison/Moravian. Egad! How could I forget that?

  18. September 4, 2012 at 6:04 pm | permalink

    ArborWiki is a great place to scoop up the contents of lists like the one that folks are collaborating on in this comment thread: [make this ArborWiki page]. To be clear, I don’t mean to imply that this isn’t a sensible use of a comment thread. It’s just that I think it’d be worth assembling it into coherent form on ArborWiki, too.

  19. By Rob B.
    September 9, 2012 at 3:29 pm | permalink

    I too would like to see whom is responsible for all the invested money thus far, as well as how much money tax payers are left to pay the bill for another failed Avalon Housing project. Perhaps AnnArbor city government will allocate funding to more successful organizations such as Ozone,Dawns farms, or Safe House. Has everyone forgot the controversal 1500 Pauline project Avalon still has yet to produce?

  20. September 9, 2012 at 10:03 pm | permalink

    The Arborwiki page referenced in #18 is now there. Edit away!