The nonprofit economic development arm for the city of Battle Creek has taken on a new role as private developer to turn around a failed attempt at reviving a prominent downtown property.
Battle Creek Unlimited gained control of the McCamly Plaza Hotel property less than two years ago and has since created a for-profit entity, 50 Capital Ave. Development Corp., to secure the necessary capital and grant funding to move the project forward.
Battle Creek Unlimited
Top executive: Joe Sobieralski,
Total Michigan employees: 8
Company: Private nonprofit corporation that acts as the economic development arm of the city of Battle Creek
Advisers: Seber Tans PLC (accounting); Kreis, Enderle, Hudgins & Borsos P.C. and Varnum LLP (legal)
It was a decidedly new role for the organization that is helping to see a major project through where the private sector had failed while recycling the potential revenue into additional economic development efforts, said Battle Creek Unlimited President and CEO Joe Sobieralski.
Through a revolving loan fund, Battle Creek Unlimited lent $3.5 million to former developer Neil Freeman and several affiliated entities to rebrand McCamly Plaza into a Hilton DoubleTree hotel. Following missed deadlines by the prior developer, Battle Creek Unlimited filed suit in January 2020 to get that funding back. Additionally, a legal agreement stipulated that Battle Creek Unlimited would gain ownership of the property, which it did by November 2020.
“The more you got into this, you could see this is not ever going to pencil out for the private sector because the cost of construction to get it where it needs to be and what we desire as a community is not going to pencil out,” Sobieralski said. “We realized it’s going to take someone like us to do it.”
Moreover, if a publicly affiliated organization was going to raise significant soft capital — such as grants — for the project: “Why should the upside go to a private developer? There’s nothing wrong with that, but why not us and funnel it back to economic development?” Sobieralski said.
Since the plan was hatched, Battle Creek Unlimited has partnered with 6PM Hospitality Partners LLC to be the owner’s representative and hotel manager. 6PM is led by former Suburban Inns CEO Peter Beukema.
The roughly $60 million project has secured a bevy of grants, loans and debt financing over the past year, including $28.65 million in direct grants and a $13.5 million senior position being guaranteed by the W.K. Kellogg Foundation. The grants have included a $2 million appropriation in the current state budget, millions of dollars in American Rescue Plan Act funds from the city and Calhoun County, and $20 million from the Kellogg Foundation.
In some ways, the pandemic and subsequent federal relief funding proved beneficial for the project.
“If the pandemic hadn’t happened, we wouldn’t be talking today. We wouldn’t have been able to finance this project,” Sobieralski said. “It opened the door to funding opportunities that weren’t otherwise possible.”
The first phase of construction on the 180,000-square-foot hotel began in the fall of 2021, a roughly $12 million start on various mechanical systems and other components that would be subject to inflationary increases, Sobieralski said. Bids for the rest of the project are expected to go out in March. Grand Rapids-based Pioneer Construction Co. is serving as the general contractor for the project, which was designed by architecture and engineering firm Fishbeck, also of Grand Rapids.
While pandemic relief helped fund the project, ongoing concern around inflation, construction costs and supply chain bottlenecks “has created uncertainty,” Sobieralski said.
However, the project is expected to be operational in late 2023. It is also much more than a hotel: The goal is to partner with Grand Valley State University’s hospitality program, as well as local school districts, for workforce development in the hospitality industry and “create that talent pipeline for residents,” Sobieralski said.
Once operational, the facility is expected to have 165 full-time employees. Battle Creek Unlimited also acquired an adjacent 85,000-square-foot mall that will be demolished and reconfigured with restaurant and outdoor gathering space.
While the McCamly Plaza redevelopment was a new frontier for Battle Creek Unlimited’s typical business operations, it may prove to be more of a springboard.
“I would definitely say we’d do it again, and I think we would explore doing it again,” Sobieralski said of creating the for-profit development model. “We wouldn’t want to necessarily compete with the private sector, but if the private sector can’t pull it off, we’ll step in and fill a void and do things like this in the future.”
“I think economic development organizations should be looking at this and doing it this way,” he added. “If you can recycle the upside dollars back into economic development, you can create a really powerful tool.”