Former school sale finalized

ISHPEMING – A downstate development company recently completed the purchase of the former C.L. Phelps School in Ishpeming and plans to begin renovating the building into Phelps Square Apartments for low to moderate income residents.

After entering into a purchase agreement with the Ishpeming Public Schools District in May 2012, G.A. Haan Development of downstate Harbor Springs and the district closed the sale of the former middle school at the end of June.

Haan plans to turn the building into 24 residential units for people with low to moderate incomes, with the development of some commercial space on the first and part of the second floors and a day care, run by the Marquette County YMCA, located in the former kindergarten in the building’s northeast corner.

Haan development coordinator Ben Ide said contractors Oakwood Construction of downstate Okemos hope to have the building finished in 12 to 14 months.

“You’re going to see some serious changes around there,” Ide said. “The parking lot is coming out on the east side of the building – that’s all going to be redone. The inside of the building is going to look completely different. It’s going to be a great project. It’s going to look great – that whole block will look completely different. There’ll be activity there. Next summer, there’ll be families living there.”

While in the original purchase agreement the school district was going to sell the building for $200,000, district business manager Anthony Bertucci said the final sale price was negotiated at $160,000. Bertucci said the lower price is due to Ishpeming schools no longer needing to lease the lower floor of the building from Haan, since district voters in May approved the sale of bonds to finance expansions and upgrades to Ishpeming Middle/High School and Birchview Elementary School.

“That’s kind of reflected, then, in the purchase price, because we’re not going to be, necessarily, long-term tenants,” Bertucci said. “We may utilize it for some gym space or something, but not to the extent that we had originally anticipated.”

In December, the city’s planning commission and zoning board of appeals granted Haan several conditional use permits and zoning variances for the building. At that meeting, Ide explained that Haan sought the conditional use permits in case the school district no longer wanted to lease the lower level.

Those conditional uses include a neighborhood grocery store and a delicatessen or catering business for the building’s first floor.

But Ide said Haan doesn’t yet know what it will do with the lower level commercial space. “We’re still working through that,” he said.

After finally obtaining builders insurance, making some tweaks to the building’s design and working out financial details, which caused Haan to delay closing the sale and consequently pay the district $10,000 in late fees, Ide said Haan closed in escrow June 25.

To purchase the building, Haan obtained a taxable bond mortgage of $249,000 from the Michigan State Housing Development Authority. To finance its conversion to Phelps Square and to subsidize the development’s low and moderate income housing – to keep rents reasonably priced – MSHDA gave Haan a $764,000 HOME program subsidy.

In addition, Haan sold $7.27 million in Low-Income Housing Tax Credits – that were to be disbursed as $727,000 annually for 10 years – to The Richman Group, Ide said.

The Richman Group, a national real estate company described on its website describes it as one of the nation’s 10 largest residential property owners, bought Haan’s tax credits for $6 million. Ide said the deal was advantageous to Haan because instead of getting $727,000 a year for 10 years, it will get $6 million disbursed over two or three – allowing it to use those monies as additional capital for the project.

Ide said having that additional capital up front will allow Haan to keep rents low.

“We use the proceeds from the sale of those credits as a source to build the project,” he said. “We don’t have to pay the investor back, so it allows us to place less debt on the project, which means we can target lower rents.”

Bertucci said that he and the school board are pleased with the sale and look forward to seeing how Haan can improve the property.

“It’s nice. It’s something that’s been in the works for a long time,” he said. “The board feels it’s a good project and I think it’s good for the whole community. And I’m just happy that we’ll be able to utilize that space as a community.”

Ide agreed, saying that having the apartments finished and occupied will help revitalize the city.

“Once people start living there, I think it’ll rejuvenate that block, or it’ll start to rejuvenate that block,” he said. “Human activity is, in most cases, good for places. You see downtowns that are bustling with people – it’s because they’re vibrant, they’re active. People want to be there. And I think Phelps Square will have that effect on this little neighborhood and Ishpeming.”

Zach Jay can be reached at 906-486-4401. His email address is