May 19 2014 12:00 AM

Landlord provides documents to rebut Bernero’s claim that developer didn’t provide clear offers


MONDAY, May 19 — As the Lansing City Council prepares to vote tonight on the Lansing Police Department’s proposed move to the city’s south side, the landlord of the current North Precinct is rebutting Mayor Virg Bernero’s claim that he never made a clear offer.

The Bernero administration has been sparring publicly for quite some time with Harry Hepler, whose development company H Inc. owns the police’s current May Street space. Bernero has claimed that Hepler never offered a “bonafide clean proposal” to extend the current lease. On Friday, Hepler gave City Pulse documents dating back to May 2013 that he contends show he did make such an offer.

Asked to comment, Lansing Chief Operating Officer Chad Gamble maintained that Hepler still didn’t provide anything with a simple extension. He declined to comment on the documents, saying there is “no use in discussing it further.”

The communication began on May 17, 2013, when Hepler met with Bernero to give him two documents. The first was to notify H Inc. that the city would not be renewing the lease for the North Precinct. The second was a document to execute an extension option on the current lease. Under that proposal, the city would continue to pay its current rent rate, but he provided the city an option to terminate the 10-year lease with a one-year notice to Hepler’s team.

Hepler and Steve Purchase, vice president of H Inc., said they heard nothing from the city until City Attorney Janene McIntyre wrote a letter on Sept. 10. Her letter listed 13 concerns related to the North Precinct facility including roof leaks, flooding, issues related to heating and cooling the facility and parking lot upkeep concerns. The 14th item in the letter requested details and terms for a lease extension.

H Inc. responded in a letter Hepler said he hand-delivered to city officials in a meeting on Oct. 29, countering each of the concerns noted in the city’s letter.

On Oct. 30, McIntyre wrote to Purchase again, noting the two had met the previous day. In that letter, the city requested a five-year lease renewal with a termination option upon one year’s notice or a two-year lease with a one-year option to renew. The city also asked the rent be dropped to $13 a square foot. The city was paying approximately $14.97 per square foot. The CBRE/Martin 2013 analysis of rental rates in downtown shows the going rate for such property is $17.50 to $23.50 a square foot.

After that, there are no written communications until Feb. 14, when Purchase wrote to Bernero offering to discount the rent 10 percent, with a possibility to get as much as 20 percent off the lease costs, as well as a decrease in utility costs. That proposal also included the possibility of donating some space for “a small police post in the Northtown neighborhood.”

The city responded on Feb. 26, notifying H Inc. that it would not be exercising its option for a five-year renewal lease on the North Precinct location. That letter was signed by Gambl.

Hepler responded to the city’s notice on March 5, wishing “only success” to the city’s partnership with the Lansing School District. The letter noted that H Inc. was open to future discussions about maintaining a presence at the current facility, particularly in light of the city’s “aggressive timetable to accomplish moving the Lansing Police Department.”

In mid-March, however, Purchase and Hepler said the city called them and asked them to come in with a proposal to match or provide better terms than the school district proposal. On 2 p.m. March 27, Hepler, Purchase, Gamble and other city officials met to discuss the plan. There were no documents drafted at that meeting, but Purchase said they later received a call from Gamble requesting a written proposal.

Purchase said they hemmed at the idea of putting the proposal in writing, worried they would get into a bad situation should the proposal get out. City officials, he says, told him to stamp the proposal as a draft, because the city has a policy “not to release drafts.”

“We didn’t want to get into a ‘he said, she said’ scenario,” Purchase said. “We didn’t want it to come back to bite us — which I guess it kind of did.”

Purchase said they were worried because their March 5 letter showed H Inc. had already gone on record as supporting the move to the Hill Center.

Ultimately, they sent the document, which was stamped draft, to Gamble and Police Chief Michael Yankowski on March 29.

That proposal, which was leaked to City Pulse and reported on April 30, would have been a four-year lease — just like the one proposed with the school district for the Hill Center. Hepler maintains it would have saved the city hundreds of thousands of dollars, while the city maintained the move was “revenue neutral.” As part of the deal, the city could opt not to pay the rent, and instead provide a right of first refusal to purchase city property. If the city did not want to exercise that option, it could “pay the back due rent, without interest,” Hepler said.

At the time the plan was leaked to City Pulse, Randy Hannan, Bernero’s chief of staff, said the proposal had conditions for Hepler to purchase City Hall and/or a city parking ramp. Along with the length of the proposal, those terms were not acceptable, Hannan said at the time.

Hepler and Purchase said the City Hall purchase option was an example of city property put up as collateral to satisfy bankers and investors. Hepler said they would have taken any number of city owned properties in such a contingency.

On May 8Purchase wrote to City Council providing another proposal to the city to stay put in the North Precinct. This proposal was designed, Purchase wrote, to match the “Harry Hill lease terms.”

Finally, on Thursday, May 15, Hepler and his team held a press conference to announce H Inc. was willing to donate the space where the North Precinct is currently to the city. Bernero has rejected that proposal.