Letter of Interest

Letter of Interest
To: John Hanifan, City Manager
From: Preservation Chelsea - Chelsea Connection Team
Date: February 16, 2010
Re: Former Longworth Plating Site – RFP DDA-001

The Preservation Chelsea - Chelsea Connection Team (PC-CCT) proposes to redevelop the three buildings that make up the Former Longworth Plating facility for the benefit of the City of Chelsea (its administrators and its taxpayers), the Chelsea Downtown Development Authority, and the residents of and visitors to the greater Chelsea Area.
PC-CCT shares the values and goals stated in the 1-5-2010 RFP, and have compiled a proposal that reflects these values. See Additional Information section.
Our Reality
To frame the context of this proposal, consider our existing environment:
The National and Local Economy
Our nation is in the midst of the worst recession in 80 years.
Michigan is at or near the top nationally in job loss, foreclosures and other economic indicators.
Financing, especially for speculative development, is scarce.
Commercial vacancies in the Ann Arbor area are at 10-year highs.
Nationally, there is increased interest and emphasis on sustainable development and living, including:
Increased emphasis on responsible use of local resources, including food and building materials.
Increased energy efficiency/ redus.
The City of Chelsea and Surrounding Areas
Throughout Chelsea, business is down, business vacancies are up.
Most downtown businesses are struggling for survival and need all the help they can get. Foot traffic in downtown has further diminished with the downsizing of Palmer Auto Service, relocation of the Post Office, and very recently, the closure of the Chelsea Gallery and Cranesbill Books.
Planned developments at the former UAW hall and former Federal Screw Works have been shelved or delayed, further reducing downtown traffic. Large portions of the McKinley owned Clocktower Complex remain vacant or undeveloped.
On the upside, Chelsea boasts:
A wealth of historic homes and businesses, including an attractive downtown and partially restored Clocktower complex.
McKune House was named “Best Small Library in America” in 2008.
The Purple Rose Theatre, Chelsea Center for the Arts, Sounds and Sights and other signs of a strong artistic and cultural presence.
Outstanding schools.
A safe, comfortable, small town community in which to raise a family.
Adequate parking in most areas of downtown.
Natural beauty in surrounding parks and recreation areas, which attract bikers, hikers, campers, hunters and boaters.
Despite development pressure, Chelsea remains a viable rural farming community that produces a wide variety of goods.
Downtown Chelsea is a nice place to visit for a show or an afternoon stroll, but is not generally considered a “destination city” on the weekends.
The Site
Approximately 18,000 square feet of vacant industrial space in three interconnected buildings.
Historic but somewhat disjointed appearance.
Mostly structurally sound, but in need of major and immediate weatherproofing, stabilization and repair to prevent significant, irreversible degradation.
Virtually no on-site parking, but with access to 17 parking sites immediately across Jackson Street, along the railroad.
The vacant site and the railroad tracks are viewed by visitors as a barrier that separates the downtown from the Clocktower development.
Our Vision
The PC-CCT proposal for the Redevelopment of the Chelsea Connection builds on our strengths as a community, but is founded in a realistic view of the environment in which we find ourselves.
Build on our Strengths:
Chelsea’s downtown remains viable.
Businesses established at the site should be structured to complement and strengthen existing businesses.
People love downtown Chelsea, but need a reason to come back more often, stay longer, and spend more.
Chelsea residents have demonstrated a strong local interest in and support of the arts.
Businesses at the site should include artists (visual or performance)/ craftsmen/ music, preferably locally produced.
Downtown Chelsea is already a historic downtown.
Historic tourism, said to be the fastest growing segment of tourism, does and will increasingly bolster Chelsea's economy.
Renovation and restoration should enhance the historic character of the site and downtown.
Chelsea is eligible for Listing on the National Register of Historic Places.
Chelsea includes several successful restaurants, but has room for additional niche markets not presently represented, possibly a microbrewery, a downtown breakfast diner, and/or health focused eateries. There is also a demand for more live performance and entertainment venues.
Downtown Chelsea is unique, classy, a little quirky, eclectic and fun.
Development should cherish and augment these traits.
Our Vision for the Site
The former Longworth site will become The Chelsea Connection, linking downtown visually to the Clocktower, drawing pedestrians to cross the existing divide.
The redevelopment of the site will be a model for adaptive reuse and sustainable design and construction. It will become an attraction not only for the businesses housed there, but also for its historic value and forward thinking redesign.
This example of forward thinking will be used in local, state, and national literature and create more positive press for Chelsea.
The redevelopment will maximize use of nearly all of the existing structures, while accommodating the many demands on the site, including parking and environmental hazard containment.
The vision shared here is the preliminary near-term plan (for full occupancy in 3-5 years). Some of the lower value uses could be redeveloped in the long term for higher value uses, when economic pressure warrants further redevelopment. The PC-CCT philosophy is that it is important to the City and downtown businesses to attract activity sooner rather than later, for the continued health of existing businesses. Proposed uses will be further refined with input from the community – as voiced by citizens and business owners in surveys and open planning sessions. These sessions will dovetail with fundraising campaigns, hopefully held on-site.

Proposed uses are further discussed in the Project Overview section. An overview follows:
Patrons will be visible through the restored Daniels Showroom, home to a restaurant, eye-catching retail display, Chelsea information kiosk (with maps, “walking tour” brochures, directories of businesses, events and activities), and/or historic Chelsea and automobile photos and displays. This fishbowl-like front face may house a portion of a business, but will also be the focal point for activity reflected throughout the complex. In the summer, patrons will enjoy dining on the new rooftop garden patio above the showroom.
Showroom activity will flow seamlessly into the Mack Building. Showroom and Mack buildings will be public space, with an open stair, elevator and public bathrooms.
Within the Mack Building, visitors will shop for locally grown produce, unique, locally crafted art, and furnishings. Other spaces might include a community kitchen, a bakery, health food store, and/or perhaps other retail shops (outfitter, music store and shoe store have also been suggested). Some of these activities will be housed in permanent shops, and some in flexible use space, especially on the first floor. The second floor of the Mack building will be an open-feel restaurant or microbrewery (with live entertainment) that makes adaptive use of the antique built-in cabinets in the second floor offices. Restaurant may also include secured displays of Chelsea history (furnished and maintained by Chelsea Area Historical Society). Restaurant(s) will cater to and be a meeting place for families and young adults, and emphasize healthy, flavorful choices, prepared with local and/or organic produce.
The second floor of the Livery Building will house approximately 8 urban-edged, loft-style apartments, with a central common area core (shared among residents) with laundry, gathering and lounge areas. A partial third floor addition will provide tenants with views of downtown and the Livery rooftop garden that surrounds this 500-1000 square foot living space – a place to fire up the barbeque, share conversation with friends or just relax. These units could be leased, or sold as separate condos.
The lower level of the Livery building will house indoor parking for second floor residents and workspace for the Chelsea Artisans Cooperative. Rear addition that presently houses plating tanks will be demolished, and replaced with impervious parking for Livery occupants and for adjacent First Congregational Church on Sunday mornings.

Preliminary redevelopment schedule and phasing is addressed in Additional Information. Efforts will focus on (in approximate chronological order):
Stabilization and weatherproofing structures
Remediation and encapsulation of environmental hazards
Developing high value/ high demand residential units
Drawing attention to front façade with showroom restoration (prepping for anticipated tenant)
Renovating and leasing existing spaces as quickly as possible with “appropriate value” users, allowing potential for additional value-added upgrades in the future.

The proposed redevelopment plan will draw folks (workers, new residents, artisans) downtown quickly, helping stabilize existing downtown businesses. It will also improve the financial position of the site as quickly as possible, giving additional leverage for financing the balance of the development.
Our Vision - The Partnership
Chelsea will continue to own the property while under redevelopment – for three to five years, while the property gains value and the real estate market recovers, maximizing financial benefit to the city. While some additional funding will be required by the City / DDA, the PC-CCT will work to minimize additional expenses and optimize return on investment for the city. See proposal for additional information.
PC-CCT will design and manage renovations, nurture business prospects, manage real estate leasing, and secure additional funding through aggressive grant writing, fundraising, and loans through financial institutions and/or private lenders. While most general planning and administrative work will be done by PC-CCT at no expense to the City, some members of the PC-CCT will be compensated for a portion of their work under a "reduced rate, deferred and at-risk" compensation agreement. See Project Overview - Financial Plan for additional discussion.
The Bottom Line
Conceptual construction estimates, financing and cashflow projections are discussed in Project Overview – Preliminary Financial Plan and other referenced sections. PC-CCT will work to make this project a financial success for the City of Chelsea.
Our Team
The Chelsea Connection Team is comprised of concerned citizens and experienced design, construction, and real estate professionals that have joined with the non-profit corporation Preservation Chelsea to redevelop the former Longworth site. Refer to Proposer Information and Additional Information for organizational chart and key team member profiles.
Our Commitment
Communication with City of Chelsea and DDA
Single point of contact with PC-CCT
Monthly written updates and active management of schedule and budget
Quarterly presentations/ Q&A with City and/or DDA.
Fiscal Responsibility and Accountability
Full disclosure, accountability and safeguards for all fiscal decisions.
In making decisions on the project, the goal for the PC-CCT will always be optimizing long-term value to the City of Chelsea and its residents, not personal gain.
We the leaders of the Preservation Chelsea - Chelsea Connection Team thank you for your consideration of the enclosed proposal, and for your commitment to the long-term growth and responsible development in the City of Chelsea.

Sincerely,

Michelle McClellan – President, Preservation Chelsea

Joe Merkel – PC-CCT Liaison to City/ DDA

Jan Bernath –Director, Preservation Chelsea

Tom Girard & Scott McElrath – Design Team Coordinators

Project Overview

Project Overview
Proposed Uses
Overview:
PC-CCT proposes adaptive reuse of all three buildings. (The rear tank building addition to the Livery Building would be demolished.) Uses described below are the basis of construction cost estimates, cashflow projections, and design loading. While they represent target uses, final use will evolve as negotiations with prospective lessees continue and as the PC-CCT further explores community needs with area residents in planning sessions to be held in the restored Showroom.
Prospective Tenant Profiles describe program (space, infrastructure) requirements of potential tenants. See Additional Information. Proposed uses within specific building areas and other building modifications are described below.
Based on proposed uses of the site and preliminary review of zoning requirements, PC-CCT believes rezoning of the site and zoning variances will not be required. PC-CCT will work to address all zoning related issues with City/DDA and all stakeholders.
Daniels Showroom (1940s Addition):
First floor: Restaurant with focus on natural foods. Limited eye-catching retail display from local artisans. Small Chelsea Information Kiosk. Historic photos and other secured displays. Open flow to Mack Building.
Rooftop: Rooftop patio garden housing a portion of the dining space for a Restaurant or Microbrewery.
Egress: New public stair with artistic flair. New 3 stop limited use elevator will link Showroom first floor level and Mack Building first and second floors for ADA accessibility.
Mack Building:
First Floor: Public Restrooms. Indoor market, local produce, local artisans, bakery, and small retail shops. Second Floor: Portion of restaurant (overlapping from showroom rooftop patio), with performance space for live music or theatre.

Alternative: Pending additional analysis and final business model selected, first floor may include Shared User Market and Shared User Kitchen. See Additional Information – Prospective Tenant Profiles.
Mack-Livery Connector:
Egress passage for Mack and Livery Buildings. On-grade loading dock with air, fire and security locks for both buildings. Stair from floor level to back alley grade allows access to refuse (dumpsters/ recycling) in rear, and possibly public access from nearby Church to parking along railroad.
Livery Building:
First floor: Chelsea Artisans Cooperative Workshop - working primarily on larger scale projects - in wood, metal, stone – furniture, furnishings, art, building components. Enclosed, secure parking for residents/ tenants – approximately 8 spaces. Secure, compartmentalized storage for building tenants - bike storage for residents, stock storage for retail shops, and chair and table storage for flexible use space. Public or tenant-only restrooms.
Second floor: Approximately 8 studio apartments with an urban edge. High quality but clean, minimalist look. Second floor also includes 500 to 1000 SF of shared collaborative living space, laundry. Premium energy efficiency and sustainability are focal points of design and marketing for these units.
Third floor: New community rooftop garden for tenants – approximately 500 SF enclosed, and 500 SF covered patio, surrounded by 4000 SF roof garden (green roof).
Livery Building Rear Addition:
Demolished and replaced with impervious parking, a portion of which may be covered.
Consideration for an Outfitter:
PC-CCT recognizes RFP DDA-001 specifically listed: outfitter retail, housing, restaurant and parking. While our proposal addresses the last three, our preliminary investigation indicates an “outfitter” may not be an ideal fit for the site for the following reasons:
While thousands of outdoor seekers travel through Chelsea to enjoy Waterloo and Pinckney Recreation Areas on summer weekends, Chelsea is home to Aberdeen Bike and Outdoors, Pamida, and even hardware stores that carry some outfitter-related items. PC-CCT believes that it is in the best interest of the City to strengthen these existing businesses by encouraging them to carry additional items that might otherwise be sold at an Outfitter store, and helping them develop this new market accordingly.
Parking at or near the site is not conducive to vehicles towing trailers – a frequent occurrence for prospective outfitter customers traveling through Chelsea.
Despite these reservations, PC-CCT will conduct additional research and attempt to attract an Outfitter if it proves to be the best fit for the community.
Conceptual Size
Occupied Area impact on existing and proposed structures, all in approximate, gross square feet (SF):
Showroom/ Daniels Addition:
First floor: no change, 760 SF
Roof garden: new 760 SF of summer-occupied outdoor patio space
Mack Building:
Basement/ Pit: existing gross area approximately 400 SF. Portion may be retained for mechanical space, pending further assessment of contaminants and water table. Otherwise, area will be filled/ sealed.
First floor: no change in gross area, 3800 SF, split between two levels.
Second floor: little or no change in gross area, 3800 SF. New open stair will reduce net area.
Mack-Livery Connector:
First floor: no change in covered area, 730 SF. Gross enclosed area will be increased from 240 SF to 500 SF to accommodate 30 foot truck on-grade loading dock with new air lock.
Livery Building:
First floor: no change in gross area, 5100 SF
Tank Room Addition: Demolition of 1500 SF
Second floor: no change in gross area, 5100 SF
Third floor: new enclosed area, 500 SF, additional covered patio: 500 SF

Total Area
Covered Footprint: Reduced from 11,900 SF to 10,400 SF
Enclosed Floor Area: Reduced from 20,300 SF to 19,600 SF

Note: "Enclosed Floor Area" is floor space enclosed by walls and roof, but not necessarily conditioned space (eg. parking area in First floor of Livery is enclosed but not conditioned). "Covered footprint" is total roof area, or "bird's eye view" area.
Economic Impact
The proposed Chelsea Connection development will have significant, positive, short and long-term impact on the Chelsea area, including the following:
Economic Impact on Local Business:
Increase in foot traffic during a large portion of each day and week, due to the diversity of occupant uses. This foot traffic will increase the pool of potential customers for all downtown merchants.
Occupants/ tenants of the Chelsea Connection will have immediate and long-term need for many of the goods and services provided nearby. PC-CCT will purchase goods and services from local merchants for the construction and renovations, and will encourage tenants to follow suit. PC-CCT will work with tenants to identify needed goods or services and share this information with Chelsea Chamber of Commerce, DDA and individual merchants, so that they might expand their services to meet this need.
By hand selecting business tenants for the Chelsea Connection, and working with them on developing their business plan and market, PC-CCT can ensure that each is a “good fit” for downtown, rather than focusing exclusively on leasing to whatever will bring in the highest rent, potentially at the expense of existing businesses. For example, introduction of CVS Pharmacy in lower town Chelsea has cut into Chelsea Pharmacy’s once-strong market, threatening its long-term viability. Although CVS appears to be very successful, their success has come at the expense of Chelsea Pharmacy and other local retailers.
Economic Impact on City of Chelsea and its Residents:
Property tax and lease income: PC-CCT’s ultimate goal for The Chelsea Connection is to return it to the tax roles, at an appropriate value tied to its lease income. During the redevelopment, property will not be subjected to property tax since it will be owned by the City/DDA. However, leases will be structured to collect rent based on anticipated property tax. When property is eventually sold, leases will revert to triple net terms (except for residential component), at which time lessee will be directly responsible for property tax.
Property value appreciation: Improvements will result in significant increase in value and capital gain to the City/DDA when property is sold. PC-CCT understands Chelsea DDA has invested approximately $420k in the property since it was purchased in 2008. Due to recent corrections in local real estate values, PC-CCT believes it is in the best interest of the City/ DDA to retain the property while it is redeveloped, during which time it can be expected to increase in value and the real estate market to partially recover. With each improvement made by PC-CCT, property value will increase. If property is sold after property is fully developed as outlined in the proposal, PC-CCT projects the property will be worth approximately $1.6M in the current real estate market, but substantially more as the regional market continues to recover. Analysis is based on anticipated lease rates and excludes inflation and readjustment/ recovery in the real estate market that we expect will occur during this period of time.
Economic Impact on Chelsea Area Workforce and Prospective Business Occupants:
Job Stability and Growth
Over the next 3-5 years, the Chelsea Connection will offer short-term construction work to many area workers. With area construction activity in recession, these opportunities will make a big difference to workers in this struggling industry. The PC-CCT will maximize the use of local labor and skilled trades.
Unlike new construction in which much of the cost is for materials produced elsewhere, the labor-intensive nature of rehabilitation of historic buildings results in relatively more of the money expended for local labor, keeping salary dollars in the community longer. Dollars spent on imported materials circulate through a community only once, but dollars spent on local labor circulate through a community six times.
The PC-CCT projects that The Chelsea Connection will be host to the equivalent of approximately 20 long-term, full-time (40 hour/week) jobs, measured based on work performed on-site.
Small business/ talent incubator. Chelsea Artisans Cooperative and Mack first floor flexible use area offer potential to “soft-start” new businesses by offering low-cost terms that allow tenants to ramp up their costs as business grows. With the support of these low-cost start-up opportunities, tenants in these areas can focus on growing their business. Potentially these growing businesses may outgrow these spaces and move into higher value properties in the area that are currently underutilized (empty portions of Clocktower complex, former Bookcrafters, former Federal Screw Works, former UAW hall, former Post Office etc.). Mack second floor performance space offers budding area talent new opportunities to perform.
Management Plan for Purchase
While PC-CCT is not in financial position to purchase the subject property and finance needed improvements for redevelopment, we are in position to manage the redevelopment, marketing, leasing and ultimately sale of the site on behalf of the City of Chelsea, at virtually no cost to the City. In addition, PC-CCT will work actively to raise a portion of the needed funding through community-wide campaigns and aggressive grant proposal writing. See Preliminary Financial Plan for additional information.
PC-CCT is confident that the proposed arrangement would be in the best interest of the DDA, the City and PC-CCT. However, PC-CCT is willing to discuss alternate arrangements that would result in the successful rehabilitation of the property. The opportunity for redevelopment of the entire property for adaptive reuse would showcase Chelsea as a place where residents and government work together for the common good of both the business community and the enjoyment of the community at large. In short, it would be a model for other communities to emulate.