Developer, city strike controversial $1.35M from city hall deal

UPDATE: This story has been updated with comments from City Councilmembers and Mayor.

LANSING, Mich. (WLNS) – A local developer has agreed to drop a $1.35 million portion of a purchase deal for a new Lansing city hall.

As 6 News exclusively reported on Feb. 12, Boji Group and city officials had struck a tentative deal for the city to purchase the former Masonic Temple, 217 S. Capital Ave., for a total cost of $5 million. The deal included $3.65 million for the building and the land and an additional $1.35 million for a permanent visibility easement and carrying costs.

The later part of the deal, $1.35 million, had received pushback from City Council.

Thursday, City Spokesman Scott Bean confirmed the $1.35 million had been struck from the purchase agreement. “It’s been removed,” Bean said. The new proposal will also strike the easement, Bean noted.

In an interview with 6 News, Lansing Mayor Andy Schor said he thought the original deal, including the carryings costs, was fair. But he recognized the city council was not onboard.

“The argument was made and through the legislative process we heard, we heard the people, we heard the Council members,” Schor told 6 News. “We had agreed that that we would support taking it out.”

Schor said the developers, the Boji Group, was eager for the Masonic Temple to become the new seat of government for the capital city.

Lansing City Councilmember At-Large Peter Spadafore the elimination of the additional $1.35 million in the proposed purchase agreement clears the way, for him, to support a “once in a generation” change in the city.

“I am as well of my reservations really centered on those carrying costs and making sure that we were not paying for things that were not of a benefit to the city of Lansing,” he said of council opposition to the now rewritten purchase agreement.

But First Ward Councilmember Ryan Kost is not so sure the Masonic Temple is the right place for a new city hall — or a good deal.

“I have not received an updated cost for renovations of current city hall and a response to why use a RFP from 2019, pre-COVID when we have so many more buildings now empty downtown,” he told 6 News via Facebook messenger Thursday afternoon. “I’m not sure it’s the best deal.”

The easement will cost taxpayers about $350,000 and would prevent Boji from developing a 20-spot parking lot on the north side of the building.

Boji Group owns the building that the lot is attached to and can’t detach the lot from that property to sell it by itself. The building is the former Farnum Building, located at the corner of Allegan St. and Capital Ave. in downtown Lansing. It was used to host the Michigan Senate offices and hearing rooms.

John Hindo, president of the Boji Group tells 6 News the lot is part property for which the company has a mortgage. The lot cannot be separated from the building and sold separately he says. In addition, the company has lease agreements with current tenants that require them to provide parking spots in the small parking lot in question.

The remaining $1 million would be used to cover the developer’s costs in holding onto the property before the city had the financial wherewithal to create a new city hall.

“We’ve held it for this opportunity, and we have expenses that we’d like to be reimbursed for,” Hindo says of the deal. “Again, we could have sold the building over a year ago for $1 million over our asking price and not incurred any of these expenses, but we knew, at some point, there was going to be a city hall opportunity.”

What is it that Hindo says the city should foot the bill for, exactly? “We’ve been paying for taxes, insurance, utilities,” Hindo says, “You know, electric, Board of Water and Light, all the utilities and maintenance repairs and carrying the building.”

Spadafore, the councilman, dismissed those claims in an interview with 6 News.

“That was not a compelling argument,” he said. “I think, in private development, there is risk associated with purchasing any building, and that risk was that carrying cost, those taxes, the utilities.

Records on the city’s website show the company has paid $481,146.78 in property taxes for the building since obtaining it in 2021. Records show the company paid Cooley Law School $1.75 million for the building at the time. Cooley’s ownership kept the property off the tax rolls due to its nonprofit status. Boji Group is a for-profit entity.

The City Council is expected to review the deal and vote on it in mid-March.

Discussions of a new city hall have been ongoing for nearly a decade. Former Mayor Virg Bernero had struck a deal with Chicago developer J. Paul Beitler to purchase the current city hall and redevelop it into a hotel and restaurant complex.

But when Lansing Mayor Andy Schor was elected, he nixed the deal because of concerns about where the city would relocate the 54-A District Court and the jail facility. In November 2022, taxpayers approved a $175 million bond proposal to build a new public safety facility.

That new facility will be located on South Washington Ave. and replace the old National Guard Building that used to house the city’s election operations.

Last year, the state legislature approved a $40 million budget appropriation for the city to have a new city hall.

Following that announcement, the Schor administration negotiated a deal to not only purchase the building but to hire Boji Group to develop the building for city use. Under that deal, four of the building’s seven floors will be redeveloped to meet city needs for an estimated $42 million. Schor says the other three floors could be rented to the Lansing School District or the state.

The $2 million over the state appropriation for city hall would come from the sale of the current city hall building. Schor is expected to sell the building Beitler for his planned hotels and restaurant hub.

Schor says he’s not focused on the $1.3 million because the entire deal for the purchase and development of the building is a win for taxpayers.

“It’s a win for the preservation community because we’re preserving a building. It’s a win for downtown because we’ll have a revitalized hotel at probably one of the best spots in the city and we’re doing it without spending Lansing taxpayer dollars to do it,” says Schor. “it’s a win for the taxpayers because they get a more effective and efficient city government where they can come and pay taxes, pay their bill, get a permit, see City Council, see the mayor – all in one place.”

This is a developing story

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