Nov. 5 2014 12:00 AM

PEELING BACK THE LAYERS OF THE KNAPP´S CENTRE

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There are many layers to the renovation of the Knapp´s Department Store building in downtown Lansing. Everything about the building is layered — layers of shiny metal and glass, layers of shiny financial incentives, and, now, layers of occupied housing, office and retail space.

It also has layers of history, going back to the Hotel Downey, the fabled watering hole and politician hangout that stood on the same piece of land before Knapp´s was built in 1937.

But you don´t have to go back that far to uncover the notso-shiny layers of lurches, reversals and near-disasters that led to the rebirth of a national Streamline Moderne landmark.

Bob Trezise, CEO of the Lansing Economic Area Partnership, called it a "very complex ordeal."

"There were times when it was a dead stop," Trezise said. "We couldn´t figure it out any more."

Mark Clouse, counsel for the Eyde Co., owners of the building, was driven to introduce a new plural noun to the English language. He called the project "a Herculean effort with 20 Herculeses."

BIG BACKLASH

Some time in the early 2000s, Clouse went to the Michigan Athletic Club for a routine workout.

He was feeling chipper. A few days before, the Eyde Co. had unveiled a plan to strip Lansing´s crumbling downtown icon, the old Knapp´s Department Store building, of its rusty old porcelain skin, and put on a modern facade and develop the white elephant into office space.

He was collared by an irate Joan Bauer, then a Lansing City Councilwoman.

"You cannot destroy that building," Bauer told Clouse.

Like many people in Lansing, Bauer grew up with Knapp´s. She visited Santa there as a kid and worked the cosmetics counter at age 17. Even when it was a vacant shell, from 2001 to its renovation this year, the Streamline Moderne landmark was second only to the state Capitol as a Lansing icon.

Clouse was taken aback. He was proud of the new plan.

"God, I was excited about it!" he said. "I remember thinking, ´This is cool, it looks so new.´ Backlash. Big backlash."

Bauer said she´s proud of what she said to Clouse that day, especially if it had anything to do with persuading owners George and Louis Eyde to back off from the plan, which she called a "travesty."

"It quickly became apparent that people feel they have an interest in that building because they grew up with it," Clouse said.

Sentiment and Santa weren´t the only reasons. Soon after the announcement that the Eydes were going to strip the old skin off the building, a red light flashed at the State Historic Preservation Office.

"We called [the Eyde Co.]," state preservation specialist Robbert McKay said. "We said, ´It´s your building, and you obviously can do that, but would you mind if we had somebody that´s familiar with the building come and look at it and make some other suggestions?"

(Neither McKay, Bauer, or Clouse remember exactly when this happened, except that it was in the early 2000s. George Eyde, co-owner of the building with his brother, Louis, said he doesn´t remember any plan to modernize the facade.)

After talking with the Eydes, McKay picked up the phone again and called Lis Knibbe, a historic preservation architect at the Quinn Evans firm in Ann Arbor, and asked her to get over to Knapp´s "fast."

Knibbe knew about the plan to flay Knapp´s. "They looked at putting a contemporary skin on it," she said. "I saw the renderings."

She studied the structure and laid out a mixed-use proposal that would save the building´s historic shell. She recalled putting together a proposal for the Eydes as early as 2001.

"It sat for a while and nothing happened," Knibbe said.

Several years went by. "The Eydes finally picked up the study and asked us to implement it," Knibbe said.

There are several theories about the time lag. The market wasn´t ready. The Eydes weren´t ready. Nick Eyde, who would later become the project´s spark plug and project manager, was still playing professional football in Europe. Maybe Lansing wasn´t ready.

"We had to wait for the market to catch up," McKay said. "But we got Eyde´s attention. The irony is, what [Knibbe] put in that first report is basically what they ended up doing."

RISK OF DEMOLITION

Owners George and Louis Eyde had good reason to be skeptical of a mixed-use makeover for Knapp´s. They had already cycled through that dreary experience. After the Eyde Co. bought the building in 1980, Knapp´s Department Store became the Knapp´s Centre, with state offices, including the Department of Natural Resources, a consulting firm, a newsstand, and a restaurant/nightclub, Tango´s. George Eyde said the company spent millions on interior improvements.

"They were a little bit ahead of their time," Nick Eyde said. The building was at capacity in the mid-1980s, according to George Eyde. It was so full, he said, that the nightclub had to be scrapped so more state offices could move in. But in the late 1980s and 90s, the state offices moved out as departments were consolidated into other buildings. The consulting firm also moved away and new tenants were scarce. Retail and restaurant activity was still minimal downtown. Meanwhile, the shell of the building was falling apart.

"We were contemplating the sale of the building as late as the early 2000s," Nick Eyde said.

Sam Eyde, George´s brother, said the company considered demolishing Knapp´s "multiple times."

In 2006, Nick Eyde came back to Lansing after six years of playing American football in Europe and started working in the family business. The Knapp´s building fascinated him. Living in Rome and other Italian cities taught him how to appreciate walkable downtowns and historic buildings.

Nick Eyde started researching the tax credits available for historic preservation projects.

"His determination on that front was key," Clouse said.

Eyde quickly zoomed in on a Section 108 loan from the U.S. Departement of Housing and Urban Development, billed on the department´s Web site as "one of the most potent and important public investment tools" the feds can bestow on local governments.

George Eyde had a soft spot for the building.

"I was born in 1935 and this building was finished in 1937," he said. "We´re about the same age. I used to visit Santa Claus here and sit on his lap."

More to the point, he called Knapp´s "a one-of-a-kind building in the whole country."

Nevertheless, a full-scale historic preservation effort seemed like a layer cake in the sky to George Eyde.

"My father was the most receptive and the most difficult person to persuade," Nick´s brother Nathaniel Eyde said. "No one was more open to it but no one scrutinized the economics more carefully. It´s a hell of a mix."

Trezise recalled an early meeting with several Eydes, including Nick, as the $130 million renovation of the 1939 Ottawa Street Power Station (now the Accident Fund headquarters), long thought to be a hopeless pipe dream, got under way in 2008.

"We were aware of where this town was headed," Nick Eyde agreed. "We saw what Christman [Co.] was doing with the Accident Fund."

LAYER CAKE

In winter 2008, Lansing city planning director Bob Johnson held a meeting in his office with LEAP´s Karl Dorshimer, Clouse, Nick Eyde and a financial consultant from California. Eyde brought up the Section 108 loan at the meeting.

The Eydes would have to pay back the $5.4 million, but the loan would be secured by Lansing’s Community Development Block Grant funds. As the others listened in, Johnson called Washington to ask if the project would qualify.

´We talked about the location, job creation," Johnson said. "All these things seemed to fall into place. It was sort of an ´Aha!´ moment.´"

Karl Dorshimer, economic development director at LEAP, helped build the incentive layer cake for Knapp´s, just as he had done for the Accident Fund project.

Trezise´s penchant for drama and the accountant´s cool of Dorshimer make a lively two-act. While Trezise effusively praised Lansing Mayor Virg Bernero for being a "risk-taker" for signing on to the Section 108 loan, Dorshimer blandly reminded him that the loan is backed by three layers of security, starting with an escrow account funded by the Eyde Co. and ending with the property itself.

"The city has multiple protections and cannot get stuck with the bill," Trezise agreed, leaving the essence of Bernero´s risk for others to divine.

Luckily, the Knapp´s building had some avid fans at the State Historic Preservation Office, including McKay and State Historic Preservation Officer Brian Conway, who wanted to see the building saved. Before long, Michigan Brownfield credits and federal and state historic credits were in the team´s portfolio. The state award included a special "enhanced credit," available only from 2009 to 2011, that more than doubled the amount awarded, from $1.4 million to $3.9 million. Trezise called them "super-duper historic credits."

But the Knapp´s team didn´t get everything it wanted.

They were counting on a federal Brownfield Economic Development Initiative grant, a now-discontinued program run by HUD "to assist cities with the redevelopment of abandoned, idled and underused industrial and commercial facilities."

But the competitive program proved to be a major hurdle.

Twice, the team´s applications for BEDI grants were denied.

The second failure was Trezise´s most depressing day on the project.

The application was due on a Friday in summer 2009.

Friday afternoon, the papers were signed and Trezise took off on a long-awaited vacation in northern Michigan.

"My cell phone started blowing up about 9 p.m.," Trezise said. It was Clouse. The feds hadn´t received the application.

Only city development manager Dorothy Boone had the online code needed to send or amend the application. Trezise was in northern Michigan and Clouse was at the bedside of a sick friend in the hospital.

As the sun set in the north woods, Trezise paced around his cabin, fielding calls from Johnson, Clouse and Dorshimer. Boone wasn´t answering the phone.

Johnson drove to Boone´s house after midnight and dragged her back to the office, where they re-submitted the application. They made the deadline — but didn´t get the grant.

SCRAMBLING

A few more of Trezise´s "dead stops" still lay ahead. The frosting in the Knapp´s incentive cake was a promising federal program, New Market Tax Credits, designed to help projects that will create jobs in low-income communities. But the Knapp´s team couldn´t apply for them directly. They had to look for partners (nonprofits or private foundations) who plan to apply for the credits and choose to invest, or allocate, them to projects they want to help. Two partners promised to allocate their credits to the project. Neither of them got the credits.

"We had to scramble," Nick Eyde said. The team shifted gears and began working with the National Trust for Historic Preservation, a privately funded historic preservation group best known for its annual list of the 11 most endangered places in America.

When the Trust agreed to provide their allocation for the project, the last piece was in place.

"They were excited about it," Nick Eyde said. "They do historic buildings. That´s when we knew we were closing and we could get started."

Dorshimer said the New Market loan requires the Knapp´s Centre to create about 200 low- to middle-income jobs and requires the Eyde Co. to file regular reports. (The project has created one job for sure: an added accountant at the Eyde Co. to track the Knapp´s project´s multiple reporting requirements and other strings attached to the incentive package.)

The project had to get under way by Nov. 1, 2012 to qualify for the New Market credits. That left a three-month window before the Oct. 31 closing. Nick Eyde told the design team to speed up work and get the plans ready.

"It is the most complex project I´ve ever worked on," Clouse said. "There were 15 different groups and 10 law firms working through the documents and getting the approvals."

On Oct. 31, 2012, George Eyde signed a sheaf of documents thicker than a glass brick from the wall of Knapp´s to seal the deal. (Louis signed earlier, having gone south for the winter months.) Clouse said it took them each four hours to sign it all.

"It was over a thousand pages," George Eyde said. "God, it was huge. My hand was wearing out."

Clouse found the size of the binder daunting, but George Eyde didn´t bat an eye.

"It was scary when I took out my first big mortgage, for Eydeal Villa in East Lansing in 1963, for $450,000," George Eyde said. "How was I ever going to pay back this money? That was frightening. Now it´s not frightening any more. We just roll with it."

After it was signed on Oct. 31, everybody went to Troppo´s for lunch, cell phones in hand, tracking fund transfers between sips of celebratory drinks.

Some of the fund transfers weren´t going through.

"There were snafus and things that had to be done that day," Clouse said. They went back to the table after 2 p.m. to cross the T´s and dot the I´s.

BOOKENDS

Several principals in the project maintain that the Knapp´s deal would not be possible today. Michigan´s historic credits were pulled by the state Legislature and ended on the last day of 2011. New Market Tax Credits, Clouse said, are focusing on manufacturing rather than economic development.

George and Nick Eyde singled out Lansing Mayor Virg Bernero for praise for vigorously pushing massive restoration jobs like Knapp´s and the Ottawa Power Station despite decades of failed attempts.

"Our mayor has been really out of the ordinary," George Eyde said. "In the past, they didn´t care. They tore down the old City Hall, the Olds Mansion, the old Elks hall, the Barnes mansion. So many were torn down. We´ve lost a great part of our history and it´s good to keep whatever we have left."

Lead architect Lis Knibbe said the city´s participation was "critical" to the Knapp´s project credited the Eydes for holding off on demolition, shelving the modern facade plan and doing right by the original design.

"I didn´t know the Eydes before we did this project and I knew they hadn´t done anything like this before, but they were a great client," she said. "They held our feet to the fire, but they let us implement the project as we hoped we could. We didn´t have to compromise much."

Knibbe called the Knapp´s Centre and the Ottawa Power Station redevelopment a few blocks to the north "the bookends on downtown Lansing."

Trezise reported that downtown first-floor vacancy rates downtown are nearing zero.

"It´s ironic," he mused. "Because of historic preservation, we have a future. We have a city."

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