Jackson Entertainment recently received approval for a multimillion-dollar loan for Studio Park.
According to a memo from the Michigan Economic Development Corp. to the Michigan Strategic Fund, Jackson Entertainment received approval for a Michigan Community Revitalization Program award for $5.5 million late last month.
Jeff Olsen, partner with Olsen Loeks Development and Jackson Entertainment, said the timing of the approval fits well into the schedule for the overall project. The conditions of the MCRP loan hinged on Jackson Entertainment having already purchased the land, Areas 4 and 5, that will become the Studio Park development.
“We finished our development agreement with the city, we closed in February, and because we owned the land, we were able to get this in,” Olsen said.
Studio Park promises to be Grand Rapids’ “first true mixed-use development,” as Julie Maue, Franklin Partners’ director of marketing and business development, told the Business Journal in February.
The plan includes an initial phase with 106 residential units, ground-floor retail, a 946-space parking ramp, a public piazza and a nine-screen Studio C! movie theater.
The project also drew developers Lodgco Hospitality and Franklin Partners, who plan to deliver a 155-room Canopy by Hilton hotel and a 30,000-square-foot Class A office building, respectively.
The $5.5-million loan will be used to support the residential development, the parking deck, piazza, theater and site improvements.
The hotel and office portions of the project are not included in the MCRP loan, as their developers have separate financing methods.
According to the MEDC memo, Jackson Entertainment requested the loan to fill the remaining financing gap and provide a sufficient return on the private equity investment.
The memo also said the development team was able to secure approximately $43.5 million in senior debt financing, or 63 percent of the total development costs. They also are contributing approximately $9.2 million in private equity, deferring $2.2 million in developer fees, and contributing another $5.6 million in owner debt to the project, totaling $17 million or 24.7 percent of the total development costs.
With the newly secured MCRP loan, the development team expects to receive a return of just over 7 percent on the project.
Olsen also said the projected amount of income tax the project will add to the city of Grand Rapids’ tax roll would be “substantial.”
The city predicted a $110-million investment in the first phase of development. Based on this number, and Studio Park’s predictions to create up to 440 new full-time jobs tied to the office, hotel and theater portions, with an average hourly wage of $24, the city calculated the project would generate $1,355,888 in tax revenue per year, including $234,269 in city taxes.
The city’s calculations did not include jobs in the retail section of the development.
The MEDC memo also requested Jackson Entertainment receive a waiver because the project’s debt-service ratio was less than 1.10 to 1, based on the committed financing of the project. MCRP parameters require a minimum debt-service ratio of 1.20 to 1.
MEDC staff said they were comfortable with the deviation because of the financial strength of the development team and because revenues generated from the operation of the theater have been projected at a conservative level. The MEDC predicted the average debt service coverage ratio would be above 1.20 to 1 over a 20-year period.