Avalon's TARP

"We figure we can recover our costs and make a reasonable profit." --Bill Godfrey


The Ann Arbor News reported that 3 Oaks spent $3 million on the proposed Near North site. At the January public meeting, Bill Godfrey said that was too high. He said that they'd offered to sell it for $3.5 million, but had paid just over $2 million.

According to neighborhood landlords, though, even $2 million is far more than those houses are worth. We believe that if they had to sell the property in this market, they'd be lucky to get $1 million.

No wonder 3 Oaks wants the City to change its zoning to bail out their bad investment. That's what makes partnering with Avalon such a brilliant move.

Five years ago, 3 Oaks sought a PUD for a supersized condo project, the Terraces on Main. It was practically laughed out of City Hall. Now politicians are tripping over themselves trying to find a way to approve the still-supersized Near North.

The partnership with Avalon brings 3 Oaks more than political respectability. With the condo market dead and the commercial credit market frozen, it's also their only chance to redevelop this property.

But a good deal for 3 Oaks is a bad deal for Avalon. They're not only putting up the political capital, but the financial capital as well - the money to build NeNo would come entirely from federal tax credits and state and local grants. Avalon would even find the tenants. As far as we can see, all 3 Oaks is bringing to the partnership is the "opportunity" to buy some very expensive land.

In effect, Avalon is running its own Troubled Asset Relief Program. But if they really want bail out private failures with public money, they can do better elsewhere.

In this economy, there are plenty of other developers who are underwater on Ann Arbor real estate. Once this project is defeated, Avalon should put out a Request for Proposals, inviting offers from anyone who's willing to get rid of a vacant parcel in exchange for a share in an affordable housing project. I bet they'll find plenty who'd be glad to make a deal.

Only next time, if Avalon really needs a downtown-sized building, they should put it downtown.

note: this entry has been revised since its original posting.