Late last week, when AnnArbor.com reported that Stewart Beal was changing tack relative to the Thompson Block, and going after small, unaccredited investors in order to get the stalled redevelopment project moving forward, I decided to reach out to the local developer and ask a few questions. Following are his answers.
MARK: As I understand it, having exhausted other funding avenues, you’ve decided to turn to the community, selling individual individual shares in Thompson Block LLC, the corporation you’ve set up for the redevelopment of the former Civil War barracks, for $10,000. Your hope, from what I read in the recent AnnArbor.com article, is to raise $1.74 million in this way. My first question is, given the local economy, do you think it’s likely that you’ll be able to sell 174 shares?
STEWART: It isn’t exactly correct to say that we’ve exhausted other funding sources, because our plan has always been to sell shares to real estate investors in order to raise the necessary equity capital to complete the project. You are exactly correct, however, in that we are selling 174 shares in the limited liability company we have established for this purpose, which is called Thompson Block Partners, LLC. We believe we will be successful in raising the equity capital, through the sale of shares, which, when combined with our bank financing and tax credits, will allow us to embark on a successful project.
MARK: To be blunt, I think it’s safe to say that there are a lot of people in Ypsilanti who are upset with you right now, given your track record on the project. Given that that you’ve missed deadlines and broken promises in the past, there’s a perception, generally speaking, that you’ve been insensitive to the community concerns. I know that you’d argue that there were good reasons for missing those agreed to deadlines, etc. For the purposes of this interview, though, I’d rather not get into it. I’m just interested to know if you think this negative perception will affect your ability to attract investors.
STEWART: We actually have found that the exact opposite is true. When we speak to people about the Thompson Block, they are overwhelmingly supportive of our project, and they’re really excited about the new designs, which we announced in April, and are working on now. The newly envisioned project will consist of 16 luxury lofts, 14,000sf of commercial space, and 30 parking spaces. We will combine 400 N. River, 107 E. Cross, and 113 E. Cross into one cohesive site, making a very attractive Depot Town corner. The stake holders of Depot Town, specifically those on the Ypsilanti Downtown Development Authority, and the owners of neighboring buildings, have made it clear that they are very supportive. In general, people understand that our bank being purchased by another bank in 2009 and canceling our loan, and then the fire, have led to unfortunate delays, and they are understanding that we have done all we could to save one of the most historic buildings in Ypsilanti. Owners of buildings in Depot Town have said things like, “The building looks the best it has in 40 years”. One member of Ypsilanti City Council recently said, “The City took the action it did in order to ensure that the building is not a hazard to the public. Now that the building is safe, the City should support the project”. Absolutely no one has ever told us they perceive our group as being insensitive to community concerns, but we certainly understand that it’s in the best interest of the community to complete the project for the benefit of all.
MARK: Assuming people want to invest, how would they go about getting involved? Do I understand correctly that you’ll be hosting some kind of event at Sidetrack, and giving tours of the site for potential investors? If so, when is that scheduled to happen, and how do people go about signing up to participate?
STEWART: If someone is interested in investing in the project, they can email me or Tyler Weston, who is with Howard Hanna Real Estate Services. We would then set up a one-on-one meeting to discuss the offering memorandum and the expected returns from such investment. You are correct in that we are hosting an event – called the “Thompson Block Open House” – on August 21st, from 5:00 PM to 7:00 PM. The event is not at the Sidetrack, but the Sidetrack is sponsoring the event, and the first 100 visitors that enter the building will receive a $10 Sidetrack gift card, so they can have a beer on us. The open house should be attended by prospective investors, prospective tenants, and members of the general public.
MARK: According to AnnArbor.com, you’ve already raised $300,000. I was unclear from the article, however, as to whether that money came in as a result of this new offer, or if perhaps this was the money that you’d raised several years ago, when you first set out to develop the Thompson Block.
STEWART: You are correct in that the article was unclear, but we are not going to publically discuss our fundraising success. However, we are prepared to share this information with City staff, so they can monitor our progress if they desired to do so.
MARK: I’d be curious to know who you’re pitching this opportunity to. Are you speaking primarily to Ypsilantians, or are you focusing outside the community? As your father was successful a few years ago selling $50,000 shares in the LLC he’d created to redevelop Detroit’s Broderick Tower, I’m curious to know if, perhaps, you might be looking to some of those same individuals. (As I understand it, he had 23 investors that bought in at that amount, contributing $1.15 million toward the $53 million project.) If you’re going after non-local investors, do you think the business case is strong enough to bring them to the table? In other words, I can see how local people may want to invest because they’d like to see the building saved and the block redeveloped, but, outside the community, investors, I’m thinking, would just care about bottom line.
STEWART: We are primarily pitching the investment to accredited investors who invest primarily in real estate. The definition of an accredited investor is a person who has a net worth of $1,000,000, not including their personal residence, or someone who has made in excess of $200,000 per year for the last 3 years. We can sell up to 35 shares to non-accredited investors per the SEC, however, but those investors must be very experienced in financial matters, real estate, construction, etc. We are seeking both local and non-local investors. Investors range from people who are strictly bottom line-focused, to those who are primarily interested in saving one of the most historic buildings in Ypsilanti.
MARK: Can you say whether or not any local people have invested? I’m curious, for instance, to know whether any factions of the French family might be supporting this new push of yours. How about other notable locals?
STEWART: We, as a general rule, do not identify individual investors unless they are working on the project in a public way. For instance, one of our new team members and investors is Tyler Weston, who many people know as “The Ypsilanti Real Estate Guy”. Tyler has taken on both luxury loft leasing and commercial space leasing for the project. I will say, however, that factions of the French family are very supportive of the project, and have repeatedly stated this publicly – most recently at a Ypsilanti Downtown Development Authority meeting, which is public record.
MARK: As I understand it, you have until the end of August to put a roof on the structure, or be in violation of your most recent agreement with the City. Assuming you don’t get a roof on the structure over the course of the next four weeks, what recourse does the City have?
STEWART: We like to point out that, over the two different agreements we made with City Council, we agreed to do 14 things. 13 of those things have been completed on time, and to the satisfaction of the City. Each one was extraordinarily difficult to accomplish, and we’re really proud of our efforts to save one of the most historic buildings in the City in the face of such adversity. The 14th thing is, “Within 3 years of this Agreement, the exterior envelope shall be completed”. It’s true that some interpret this to say that we agreed to put a roof on the structure by the end of August. Others, however, read the agreement differently. With that said, we very much want to work with the City of Ypsilanti to complete this project on a realistic timetable that works for everyone. In fact, we’ve been working with City staff for eight months to design a process under which to move forward to everyone’s satisfaction. Both the City, and the members of Thompson Block Partners, LLC, realize that neighter party can be successful without the success of the other. We are in this together, and we know that we’ll work well together. We’ve written a really great proposal to the City Council, and we hope they support us as much as City staff has supposed us. What recourse does the City have if it’s their opinion that we have not met the terms of the agreement? The recourse for the City is clear in that the agreement says, “In the event of any dispute regarding the terms of this Agreement or compliance by either party to the agreement, the parties agree to meet and facilitate… before taking any action to enforce this agreement.” We certainly hope to avoid facilitation, although we feel we could navigate that process successfully as well.
MARK: Let’s say I were to buy a $10,000 share, what would I likely see in terms of a return? Would I receive a share of the rents in perpetuity, or would it be more like a loan, where I got back something like three times my investment over the course of the next ten years, assuming that the redevelopment is successful?
STEWART: We would gladly discuss this at length in an investment meeting, but this is not an appropriate place to have this discussion because the answers need to be explained while reviewing 40 pages of documents. We can certainly say that an investor would be an owner of the building until an exit strategy was achieved.
MARK: Assuming everything goes forward as planned, the building is saved, units are rented, and revenues start coming in, where will I, as a $10,000 investor, find myself in the line of folks looking to be paid back? In other words, should I assume that I’ll only start to see my cut once the banks, and your other larger investors have been paid back?
STEWART: Again, we would be gladly discuss this at length in a investment meeting, but this is not an appropriate place to have this discussion because the answers need to be explained while walking through 40 pages of documents. However, in all real estate structures, the banks are paid first, and all other investors, big and small, are treated equally.
MARK: As I understand it, the entire renovation has been estimated at about $4 million, of which you’re looking to raise $1.74 million through the sale of these shares that we’ve been discussing. You also have over $1 million in historic tax credits, and another $1 million in OPRA tax exemptions. And, on top of that, you have some MEDC money, and you’re seeking a DDA facade grant. As much of this money won’t be available until after the completion of the project, though, you’re still going to need other funding sources, right? What other chunks of the financing are in place? Are these $10,000 shares the last piece of the puzzle that you need in order to make the project go, or will it still be in limbo even if you’re able to sell these 174 shares?
STEWART: You are correct in saying that, if we sold 174 shares tomorrow, and the other funding sources were not in place, the project would not start. We need all the pieces to come together as once for the project to start.
MARK: Did I hear correctly that you’re anticipating retail rent in the new Thompson Block to go for $16 a square foot? Given your knowledge of Ypsi real estate, does that seem realistic to you?
STEWART: Yes and yes. In fact, in 2009, before the fire, we had 75% of the commercial space rented at $16 to $18 per square foot.
MARK: The most recent plan calls for 16 “luxury lofts” and 14,000 square feet of commercial space. I suspect it’s way too early in the process for anyone to sign on the bottom line, but do you have any reason to believe that you’ll be able to find tenants?
STEWART: We’re specifically looking for loft tenants now, and have two lofts reserved, with 14 remaining. We would not sign a lease now, but would sign a letter of intent that describes the rent, the security deposit, and when the lease would need to be signed. There are many challengers with this project, but renting the lofts is not one. Our group of investors manages over 300 apartments in the City of Ypsilanti, of which 299 are currently occupied. Also, the West Michigan Lofts in downtown Ypsilanti, where there are 20 lofts of similar style and price, are fully occupied, and have never been vacant for more than a few days in eight years.
MARK: I’ve yet to confirm this, but I recently heard that several of your rental properties around town are on the market. Might this be a Plan B for raising equity capital necessary to redevelop the Thompson Block?
STEWART: We have recently sold a property at 210 Ferris. We sold this property because the land contract had expired and needed to be paid off. The purchase allowed us to pay off the land contract and “take home,” so to speak, $40,000, which will be immediately reinvested in Ypsilanti. We also have 218 Ferris, 806 West Michigan, and 804 West Michigan for sale with Howard Hanna Real Estate Services. Any sale proceeds would be immediately reinvested in Ypsilanti, perhaps as equity capital for the Thompson Block.
29 Comments
Let’s say I live very close to the Thompson block and I invest, will I have any say in the development? For instance, will my opinions be taken into consideration when the management team sets out to lure companies in for the retail space?
I get the feeling that almost everything Mr. Beal said in this weird interview is a blatant lie. Can somebody fact-check his specific claims? This reads like a paid advertisement for this asshole’s ill-advised real estate schemes and his wild disrespect for the law and community.
I so want to believe in this guy. I just can’t however.
It’s hard for me to get past his statement about how he’s never heard any criticism over his handling of the project. Still, though, I don’t see that we have any choice but to wish him the best. If he can make this happen, it would be great for Depot Town.
“Absolutely no one has ever told us they perceive our group as being insensitive to community concerns.”
Well, you’d better get ready. I suspect you’re going to hear it today.
The addition of 16 upscale lofts n Depot Town would be an a boon to the area, and they’d clearly sell. My concern is more with the retail mix below. Are they still working with Andy Garris on the nightclub idea?
I know there are SEC rules and regulations that one has to be aware of, but I was unsatisfied by the answers here. The questions, however, were great.
I am thrilled at the possibility of expanding and improving Depot Town. Between Linda and Jane French expanding Sidetrack, the new stores popping up and now Mr. Beal’s project at the Thompson Block I am really excited about the next chapter in my neighborhood.
Having said that I don’t know a lot about Mr. Beal but it seems that I mostly hear frustration around his name. Not only with this project but with much of his work in Ann Arbor as well. Is it unreasonable to expect this project to be a success? It seems like he and his family have been involved in real estate development long enough that if they were failures they couldn’t still be going, But then again I can’t think of a single good story I’ve heard about him.
At any rate I’d love to hear more about what sort of retail they’ll be pursuing. The retail collection in Depot Town so far is exceedingly eclectic and I’d love to see that continue. As usual I’ll insert my ongoing rallying cry for a burrito joint (and as usual I’ll point out that this is different from a Mexican restaurant of which we have an excellent selection in Ypsi).
Adam G: here are 2 articles about positive things around his name that were published in the past 2 weeks: http://www.annarbor.com/news/ypsilanti/free-bike-sharing-program-now-available-in-ypsilanti/
http://www.annarbor.com/entertainment/bollywood-film-a-happy-endingwriters-block-still-filming-in-ann-arbor-area/
Twenty-two days and counting…
http://www.thompson-building.com/
“Owners of buildings in Depot Town have said things like, ‘The building looks the best it has in 40 years.'”
Yea. Right.
Beal is delusional. And a terrible liar.
What an interesting interview.
What did you find interesting about it, Kristin? I found it unfulfilling.
Good interview, Mark Maynard.
Beal is dreaming. And I hope his dream comes true, but realistically, I just don’t see how it will happen. Let’s all wake up for a moment to consider:
If there were any money to be made by rehabilitating the Thompson Block, why didn’t it happen during the past 40 years? Even during real estate boom years, when it was actually a real building with a roof, and not just a burnt out shell. Why were there no takers when the building was taken away from Kircher?
I don’t know much about real estate, but I do know that a good opportunity to make money does not tend to sit, unexploited, for 40 years. Even with the upside of $2 million in tax credits and exemptions to offer (on a $4 million project!) where are the investors?
I suspect that if Thompson Block were really a good investment opportunity, Beal wouldn’t have to resort to trying to sell $10k shares to the general public.
If it were actually a good opportunity, someone would have offered to buy the property from Beal and he probably would have sold it already. Maybe even for less than the $300k he never got paid for repairs when Kircher was still the owner.
This is not an appropriate place to have this discussion
PS I wish a journalist would ask Beal more pointed questions about the $300k he claims to have raised already; specifically to ask whether that includes the ‘value’ of the property. I put ‘value’ in quotes because I wonder if there’s any chance it’s derived from the amount that Beal did not get paid, after performing court-ordered repair work, that Kircher did not consent to and refused to pay, when Kircher was the owner. Wasn’t that around $300k? Is it a coincidence?
What is the 13 out of 14 requirements being met satisfactorily comment referring to? This is a bold-faced lie. Does he expect the neighbors to forget the fortified wall blocking the road for years. Is there some knowledgeable historian to call bullshit on this idea that this wall is somehow the most historic building in historic Ypsilanti? War nostalgia is popular I know but who cares if some soldiers slept there for a few months?
How could this not be an appropriate venue for a discussionn? I bet you are Beal
I have several friends who have rented from the Beals. One was told that heat was free. But when the boiler for the building broke, instead of fixing it, the Beals loaned everyone space heaters, which cost a lot in electricity, and was paid for by the tenants (= NOT free heat!). This is one example of of many unfulfilled obligations experienced by their tenants.
This track record and the continued dishonesty and duping is not encouraging for the progress or success of this project. Sell it and/or tear it down.
To answer “One Question,” Andy Garris and a nearby business owner were in negotiations to purchase the old Pub 13/Club Divine building but withdrew when the bank wouldn’t lower its asking price. They now have their sights set on this building.
Brad it sounds like instead of letting your friends freeze to death, whom ever you speak of hustled up a temporary solution. Sounds like good management not bad.
Unfortunately, Jonathan Smith, it was not a temporary solution.
Here’s the problem. Beal is a slum lord, and he has had ample time to complete this project. As someone who not only loves the city of Ypsilanti, but a resident of Depot Town, I feel that I can confidently say that this is a slap in the face to the people of Ypsilanti, the historic district that is Depot Town, and the building itself. Beal has shown no respect for any of these, and deserves none from us. This building has never looked worse! (Save the night IT WAS ON FIRE!!!!) also, I am shock and appalled at the fact that Beal lied through his teeth when he said that the idea of a “new floor plan” has done nothing but excite investors. I have talked to hundreds of citizens of Ypsilanti, and EVERY SINGLE ONE OF THEM is absolutely furious. Beal, get your crap together, or get out. Ypsilanti does not want you.
The questions are fine, but were they just emailed at once to Beal? The unchallenged answers amount to giving him a mouthpiece for his load of deceptive bullshit. Very shoddy post as a result.
My initial plan, Skeptic, was to engage Mr. Beal in a dialogue. Unfortunately that didn’t happen. It was not my choice, but, given the fact that people don’t have to respond to questions posed by bloggers, this was the best that I could do. Life, as you will eventually learn, is complicated, and there are trade-offs one is forced to make. In this instance, I determined that having the answers to the questions I posed was better than not having them, so I went ahead with it. Are you arguing that we now know less about the project and Beal’s intentions than we did prior to the interview? If not, I’m not sure what your complaint is. Yes, I can see how you might say that the interview is “unsatisfying”, but I don’t understand how you can suggest that it doesn’t add at least something to our knowledge about the project. So, yeah, I get what you’re saying, but I still think there’s value to be had… Furthermore, regardless of what one thinks about Beal, and what’s been done thus far, he owns the building, and his success in this endeavor would be a good thing for Depot Town and the city. So, yeah, I want him to be successful. That isn’t to say that I don’t have questions and concerns, but, in the end, I want for him to find a way to save the building and make this work.
I was just suggesting that some fact-checking commentary about his specific lies accompanying the interview would have been nice. But commenters have helped with that. I’m arguing that this interview to the uninformed sounds like hard-hitting questions satisfactorily answered (with misinformation). But since you have learned this life lesson about compromise, you will eventually learn to more gracefully accept some level of criticism.
Hamtramck is in court with Beal over houses he rehabilitated with NSP funds, and so is Highland Park. As it was explained to me, the allegation by Highland Park is that Beal accepted payment, but didn’t pay the skilled tradespeople who did the work. In Hamtramck, he tried to do the same thing, but the city is withholding payment, insisting on paying the subcontractors directly. I haven’t had time to look up the actual filings to verify the specifics.
If only more tenants of Beal would feel encouraged to come forth with so many issues. Smaller issues like this combined with larger issues evident in the courts regarding issues that include Beal, might help create a stronger presence to take down this horrible man. Its possible that they Beal gets a lot of his money to cover exhausted share holder funds by way of filing claims against his low income tenants; drug dealers and addicts. Just to add to this dialogue, the tenants who are upstanding citizens that contribute to society end up renting from him at times, finding themselves living in conditions with horrible and dangerous people. Also, his buildings at times have been infested with bed bugs and little to no repairs when moving in. The tenants who live in these buildings rarely if not at all secure the chance to gain retribution over a slum lord like Beal. To add to this, I talked with Beal and he said that he goes to court everyday; filing claims against tenants. Well im sure its a nice way to earn a little money, accruing a large sum after doing this so many times…possibly even to fund his bigger projects!
I worked for Stewart Beal for a long time, he is a lying, cheating, corner cutting, cheap, money hungry scam artist! You can’t believe a thing he says or promises, we rarely got paid on time or there would be no money in his account when we tried to cash our checks and we would have to wait several days. He would make us drywall over mold and water leaks, caulk over holes to try to seal in bug infestations. An apartment would be already infested with bed bugs and we would tell him but he didn’t care ,he would move a new resident in anyway, one poor girl had bought all new furniture and had to throw it all away and move out. Most job sites are unsafe, and very unhealthy. I couldn’t take it anymore, I felt so bad for so many people that were suckered in to renting from him. Stewart Beal only cares about making money for himself, not the community or a historic building. Good luck ypsi!