It’s end of the year or bust for development

Times-Herald Newspapers

DEARBORN — After five years of changing plans and recently receiving a breath of new life, it could be now or never for a stalled west end development.

City officials, Hakim Fakhoury and business partner Jim Parrelly on May 24 hammered out details on an extension to Fakhoury’s preferred developer’s agreement, something that has eluded the two sides for months.

The PDA gives Fakhoury’s Dearborn Village Partners Limited Liability Co. exclusive development rights to the city-owned parking lot between Military and Howard on Garrison. DVP has held the rights since 2005 when Fakhoury leveraged his sizable collection of west downtown commercial properties and a plan to build loft condominiums and new retail suites to win the bid. The agreement since has been extended, with a series of tweaks, on an annual basis.

But when the City Council approved another extension in December, Fakhoury found many of the provisions onerous and refused to sign the document.

Among his complaints were a clause that would have required him to let the city demolish three of his vacant Michigan Avenue buildings – Giuliano’s restaurant, Bally’s Vic Tanny and Brother’s Tuxedo – that eventually would be incorporated into the broader DVP project. The dilapidated structures have been a thorny issue for years, with city officials wanting to demolish them and Fakhoury wanting to keep them standing for tax credit purposes.

Razing the buildings would start a five-year countdown until Fakhoury must have the entire project completed or lose out on about $9 million in state brownfield tax credits. In previous interviews, he has said it would be imprudent and potentially costly to bring down the buildings before a final design has been reached.

In the agreed-to extension, the provision has been eliminated, although the matter is far from settled. Earlier this spring, city workers obtained a search warrant to enter the properties after Fakhoury refused to let them in for inspections. Currently, the buildings are going through the city’s demolition process, which he is fighting.

Another changed section relates to a parking deck for the project. City officials initially proposed that Fakhoury would build the deck and pay for it using tax capture revenues. He balked, pointing to the West Village Commons development across the street from his potential project and the east downtown Dearborn Town Center. In both projects the city, in varying capacities, was involved with the construction and financing of parking decks.

To accommodate Fakhoury’s concerns, the city agreed to build and finance the deck using tax-free municipal bonds. The costs will be recovered through tax capture and parking revenues, and any shortfall will be made up through a special assessment tax to the property owner.

Aside from those provisions, the PDA extension essentially is a return to the initial project outline of 2005. Noticeably absent from the extension are plans for University of Michigan-Dearborn student housing and an Emagine! movie theater, projects that previously had been discussed.

Mayor John O’Reilly Jr. said Wednesday that as the project has evolved – and economic conditions changed – expectations on both sides have become convoluted, leading to miscommunications and friction.

“What we did is just to say, ‘OK, let’s go back to where things started, examine the possibilities through that framework, see what the market will support and then move forward from there,’” O’Reilly said.

But time is ticking. Between now and the end of the month, Fakhoury must obtain liability insurance on the parking lot in order for O’Reilly to officially execute the extension. If that doesn’t happen, a sunset clause will go into effect and O’Reilly’s authority to enter into the agreement will be rescinded by the council.

And once that hurdle is cleared, Fakhoury likely will have only six months to put a plan in place or see the project disappear.

With a new administration certain to take over in Lansing next year – Gov. Jennifer Granholm is term-limited and cannot seek re-election this November – some $40 million in state tax credits for the project probably would be up for review, O’Reilly said. And given that it’s been five years since the credits were awarded, and that the new leadership probably will have a different set of priorities, it wouldn’t be surprising to see them rescinded, he said.
“My thing is, it just makes sense to say we’re either going to get it done by the end of this year or it isn’t happening,” O’Reilly said.

Several uncertainties linger on Fakhoury’s end. He is negotiating with an out-of-state development firm to buy out his stake in DVP, he has said in previous interviews, as well as his entire portfolio of nearby commercial buildings.

Fakhoury did not return multiple telephone calls seeking comment for this story by press time.