Aug. 15–Editor's Note: The following article is the first installment in a two-part series about Hillsdale's Tax Increment Finance Authority (TIFA) and its mission to aid in the preservation of historic buildings and further economic development in Hillsdale's downtown area. The second article will appear in our Friday, Aug. 17 issue.
HILLSDALE — It's been an iconic city of Hillsdale landmark since the late 1800's, and with some help from Hillsdale's Tax Increment Finance Authority (TIFA) and C.L. Real Estate, the building's new developer, the historic Keefer House is slated for restoration, and it's redevelopment may have a transformative impact on Hillsdale's downtown area.
Mary Wolfram, Hillsdale's TIFA director, said that Keefer House Hotel LLC, a subsidiary of Peru, Illinois based C.L. Real Estate, is in the process of acquiring the Keefer House from TIFA, which currently owns the Keefer House and nearby Dawn Theater. Keefer House LLC signed a purchase agreement with TIFA in May 2018, and the purchase of the property is expected to be finalized by December.
Keefer House LLC will be buying the Keefer House with the goal of redeveloping the property to serve as a 34-key boutique hotel, which will include a full service restaurant, community space, and retail space, according to Nathan Watson, general manager of real estate development for C.L. Real Estate. To provide space for the full range of amenities they intend to offer, Keefer House LLC purchased the building adjacent to the Keefer House at 96 N. Howell Street from a private owner.
"Our initial concept is an upscale boutique hotel with 34 rooms, a restored lobby and dining room, a full service restaurant in the dining room, and it will also be available to rent out for functions," said Watson. "For storefronts we see an opportunity to introduce unique, synergistic retail. We want things that are interesting, things that our guests will love, but also things that people in the town will love as well."
TIFA first acquired the Keefer House in 2016, with the goal of seeing it redeveloped. The building's previous co-owners, Jeffrey and Marcy Horton, purchased the Keefer House and the nearby Dawn Theater with the intent to preserve both buildings until they found a suitable developer. But when they were unable to finance the extensive renovations needed for both buildings, TIFA approached the couple about buying the Keefer House.
"TIFA looked at the Keefer House as the big white elephant in the middle of downtown that needed to be developed, so they approached Dr. Horton who owned it before about buying it," said Wolfram. In TIFA's last development plan update in 2015, TIFA members said our number one priority is to get vacant buildings developed and functioning and creating economic activity."
However, because the Hortons wanted to sell both buildings at once, TIFA bought both in a package deal for $410,000 in October 2016. According to Wolfram, TIFA had been eyeing the properties for several years, after designating them as a "priority" project.
"As part of the condition of buying the Keefer House, he [Horton] said that TIFA had to buy the Dawn Theater, because he owned both of them and wanted basically to get TIFA involved in developing them," said Wolfram. "So TIFA bought both of them. From there on, TIFA has gone through a long, protracted process to get them both developed and we're still in the middle of that."
In April 2017, the city sent out a request for proposals (RFP) but received no viable offers. However, in August 2017, the city, which had recently graduated from the Michigan Economic Development Corporation (MEDC) Project Rising Tide, received technical assistance in developing a request for qualifications (RFQ), and received an offer from Keefer House Hotel LLC.
Under the terms of the purchase agreement, Keefer House LLC will pay TIFA $275,000 for the Keefer House. The company is currently in a 180-day "due diligence" period, where they are inspecting the property, and may terminate the agreement without penalty. If Keefer House LLC decides to move forward with the purchase, closing will occur by Dec. 15, 2018, and the conditions of the purchase agreement stipulate that construction on the project must begin within nine months of the closing date, and total project completion must take place within two-and-a-half years.
The city will also contract with Keefer House Hotel LLC through a triple net lease to manage the Dawn Theater, although the city will retain ownership of that property.
"We will lease the Dawn Theater, but effectively we are the managing entity," said Watson. "When we saw that the city had that asset next to the Keefer, we thought that it was a significant element for the bargain for that hotel, to generate events to fill up hotels rooms for weddings, conferences, and special events."
Keefer House LLC hopes to begin reconstruction in 2019, according to Watson, and estimates that completion of the project will take two years, resulting in 2020 as their target date for the opening.
"We envision that it will take us about nine months to finish our design and construction documents, to be ready for permitting, and to gather our capital staff for the project, and to secure the necessary commitments to move forward," said Watson. "Construction itself should take 12-15 months. So, the total time there is 24 months, for a 2020 opening."
To manage the project, Keefer House LLC has hired Brant Cohen, a Class of 2018 Hillsdale College graduate, who initially introduced Watson to the project through a mutual acquaintance. C.L. Real Estate will is set to open an office in Hillsdale, where Cohen will oversee the project.
Watson says his firm sees considerable potential not only in redeveloping the Keefer House, but also investing in future projects in Michigan's south central region.
"When we go to a town like Hillsdale, just like ours, we see a tremendous stock of historic commercial buildings," said Watson. "We see a town that's very committed, and has identified key projects and wants to work with developers on those projects. But we also see other opportunities in Hillsdale and other Michigan towns."
