The Keefer House Hotel renovation project began in 2018. Logan Washburn | Collegian

The company behind the Keefer House Hotel renovation has extended its estimated completion date — again — to next summer.

“I had personal gentlemanly guarantees this property would be done this fall, no more excuses. I took those guarantees seriously,” Mayor Adam Stockford said. “I would bet a Frosty it won’t be done in spring of next year, or any time next year for that matter.”

The project began with a city agreement in 2018 and was supposed to finish by 2020. CL Real Estate CEO Nathan Watson said the company could not start construction until 2021 due to a lengthy pre-construction process.

The historic Keefer House Hotel, built in 1885, has sat vacant in downtown Hillsdale since 2005. But CL Real Estate entered a purchase agreement in 2018 through Keefer House LLC, planning to finish restoring the 34-room hotel — including a restaurant, bar, and retail and event spaces — by November 2020. 

CL Real Estate has extended the project’s deadline repeatedly, most recently to “early summer 2024,” according to Andrew Gelzer, chairman of the Tax Increment Finance Authority, a board that redirects tax dollars that would normally go to the state toward local projects. 

Gelzer, also the chief operating officer of H.J. Gelzer and Son Inc. and general manager of Gelzer’s Hardware, said he thinks the project is on track to meet the new deadline despite challenges with the building’s structural integrity.

“The world threw all sorts of delays and roadblocks at them, which they have stuck through and overcome,” Gelzer said. “While it’s taken a lot longer than any of us ever wanted – myself included, and CL Real Estate and Keefer House LLC – they’re on track.”

The Keefer project’s construction cost for CL Real Estate has reached close to $9.3 million, with the total cost reaching $15 million, according to a Sept. 28 memo from the company obtained by The Collegian. The project also secured a $2 million investment from the Michigan Economic Development Corporation in 2021, which CL Real Estate will pay back, according to Watson. 

The MEDC is a state agency that uses taxpayer dollars to subsidize economic development.

CL Real Estate Development Associate Brant Cohen ’18 said in an email that the Keefer is a “challenging but worthy project.”

“When completed, its economic and transformational impact on Hillsdale will be tremendous,” Cohen said. “Projects of this complexity are not easy to pull off, but we remain steadfast in our commitment to the city that we will open this hotel.”

CL Real Estate has pushed back the Keefer project’s deadline several times – once due to COVID-19 shutdowns, again until November 2022, again until November 2023, and now again until early summer 2024.

TIFA bought the Keefer and Dawn Theater in a single deal for $410,000 in 2016. Gelzer said the Keefer was worth close to $275,000 at the time.

TIFA agreed to sell the Keefer to CL Real Estate for $10,000 and dismiss the remaining balance under the premise that the company would finish the restoration on time, according to Gelzer. But the purchase took place in 2018 and CL Real Estate has not yet finished the Keefer restoration.

“If they disappeared, and this just became a forever project that would never finish, we would have a stick to hit them with,” Gelzer said. “Having said that, they have been very cooperative, communicative, and so it hasn’t been truly necessary. The delays that they ran into had been completely out of their control.”

Stockford said TIFA could have taken the building back, but it would prefer CL Real Estate finishes the project.

“We’re years into this,” Stockford said.

Chris Bahash is the head jeweler at Hillsdale Jewelers, which is across the street from the Keefer. He said constant construction has been a nuisance, but he is “patiently optimistic.”

“They’ve blocked off parking spaces and walking. It’s not been a good thing for downtown,” Bahash said. “If it is done, it should bring benefits, more so than a vacant building. But I’m not holding my breath on when it’s going to get finished.”

Gelzer said while the Keefer project is a sacrifice for local businesses, both in terms of finances and the downtown atmosphere, he thinks it will benefit the community in the long term. 

“These projects are going to hugely increase the tax revenue base for the TIFA district,” Gelzer said. “While we don’t have much money right now, long term this will secure the revenue for TIFA, greatly improve and increase it, which will allow us to rapidly increase the amount of investment we can put back into Hillsdale.”

Gelzer joined TIFA in 2014. He said when he first heard about the Keefer and Dawn Theater projects, he fought against investing TIFA funds, but has since changed his mind. 

“I wasn’t thinking long term,” Gelzer said. “The Keefer Hotel was the target, that was an anchor property. They could get investment, further economic development would happen.”

TIFA had a $750,000 budget at the time it purchased the Keefer and the Dawn Theater, and members of the board felt comfortable with the fiscal commitment, according to Gelzer. At the time Dawn Theater construction began, the board had a total of $250,000 and a $1.4 million Michigan Economic Development Corporation grant for the Dawn Theater. 

The grant required TIFA to have more money on hand, so the board took out a $250,000 loan from the City of Hillsdale Board of Public Utilities, according to Gelzer. 

But unexpected complications in the Dawn Theater, where more than half of the roof supports became inverted over time, cost more than $500,000, Gelzer said. So TIFA took out another loan from Southern Michigan Bank and Trust.

“TIFA essentially bankrupted itself in the process, a huge disservice to our downtown businesses and past generations whose money went into the fund,” Stockford said. “For the record, it was several years ago, and the major drivers on the TIFA board of this project aren’t even serving anymore.”

In total, these costs amounted to $410,000 for the purchase of the Keefer and the Dawn and $750,000 in loans, according to Gelzer.

To pay off these loans, TIFA has annually been sending close to $80,000 of its $100,000 budget to the BPU, according to Gelzer. This has left close to $20,000 remaining every year, but Gelzer said TIFA will finish paying back the BPU loan in the next several years. 

“It was purchasing the buildings they had the money on hand for, there were no fiscal gymnastics that had to happen,” Gelzer said. “To match and meet our commitments, we stretched ourselves as thin as we’ve ever been stretched.”

TIFA currently has nothing left in its budget for this fiscal year, which will restart in July 2024, according to Gelzer, though in November it will consider drawing from a $28,000 surplus. Gelzer said the board has been focused on responsibility with these remaining funds.

TIFA often issues grants for facade improvements on local businesses, but it has not been able to in the first years of the project, according to Gelzer. But it has returned to issuing some of these grants, in the last two years distributing close to $7,000.

While the city managed the Dawn Theater’s restoration, CL Real Estate helped purchase supplies and fund interior improvements, Cohen said.

“CL has employed full-time staff in the Dawn Theater the entire time there have been delays at the Keefer Hotel,” Gelzer said. “The whole business model for the Dawn Theater was dependent on that hotel.” 

The Dawn Theater serves as an event space, and will be used in conjunction with the hotel once it is completed.

COVID-19 delayed the Dawn Theater project in 2020, but it finished in December 2021. TIFA still owns the building, though CL Real Estate is managing and renting the theater.

“They have stuck to their commitment to Dawn Theater as soon as we got that open for them and tossed them the keys,” Gelzer said. 

Gelzer said once the Keefer project is complete, and both businesses are paying standard property taxes, the city will benefit from a large revenue stream. 

The Hillsdale City Council passed an Obsolete Property Rehabilitation Act in 2019 to freeze property tax rates on the Keefer for 12 years, so CL Real Estate would not be responsible for paying higher tax rates immediately after the project reaches completion.

When the city council met on Oct. 2, it voted 7-2 to extend the completion date on the city’s OPRA resolution to Aug. 1, 2024, to ensure the state would respect the rates until then. 

Stockford voted against the measure, and said he struggles to reconcile giving tax breaks to outside businesses while being strict on local residents. 

“I don’t wish to be a bully to CL, or an obstructionist on the project,” Stockford later said. “I just can’t reconcile the moral conundrum of raising taxes and fees on our residents and existing businesses, who truly carry this city on their back, while giving tax breaks to those who have repeatedly broken their promises.” 

Stockford said to the council he does not expect the Keefer project to reach completion by Aug. 1.

“If we’re up here on Aug. 1 next year and it’s done, you guys can all look at me and say ‘I told you so,’” Stockford said. “But if we’re not, I’m going to look to you guys to maybe pound your fist a little bit.”

Stockford said he and some city council members toured the property several weeks before and saw some activity, and said he appreciated the commitment to make more progress. But he said he walked by the building every day for months without seeing activity. 

“I appreciate you guys cleaning it back up, it looks really nice. Been waiting for that all summer,” Stockford said. “But you know, this is excuse after excuse after excuse after excuse after excuse, and I’m not going to lend my hand to that.”

Councilman Bruce Sharp spoke in favor of extending the resolution, as it would be equally as expensive – if not more so – to let the Keefer collapse without any benefits of a renovated hotel.

“I don’t want to see us just give up on it because we have them walk away. That building will just collapse,” Sharp said to the council. “I’m amazed if you’re gonna be able to pull that off.”

Sharp said the crew seemed too small to accomplish the necessary work in time, but he said he appreciated efforts to clean up the ground behind the Keefer, and would not vote against efforts to renovate the building. 

“I don’t know how you’re going to get it done with the deadline you’re giving us,” Sharp said. “I will support you guys, but if the work stops, I’m going to be out there too screaming, because that building sat lit up all these years and nothing’s been going on.”

Gelzer also spoke at the meeting, in favor of extending the resolution.

“It gives them the chance to get their feet under them to start earning back that money before they get slapped with a tax bill on a business that’s not ready to go out of the gate,” Gelzer later said.

Cohen and new Vice President of Construction Management Nick Fox presented a progress update at the meeting.

“I made some promises that you’re going to start seeing some action,” Fox said to the council. “We’re making some pretty good progress, and you’re going to continue to see that.”

Fox said workers have recently been working on drainage, excavation, and reinforcement of the Keefer’s foundation. He also said workers would start construction on building’s the parking lot by spring.

CL Real Estate has been providing the council quarterly progress updates in the last year, Cohen said in an email. He said the company would continue this, in addition to giving monthly updates going forward. 

According to a June 2021 update from Cohen to the city, obtained by The Collegian, workers found water under concrete in the Keefer’s basement, which could threaten the building’s integrity. At the time, workers had finished drying out the basement, waterproofing it, and were connecting more drainage. 

“At the start of construction, we emphasized that the nature of renovating historic buildings brings unexpected issues,” Cohen wrote in the update. “Our new projected timeline for completion is late spring 2024.”

According to an Oct. 10 update from Cohen, also obtained by The Collegian, workers at that point had gotten permanent water pumps running, installed plumbing under the building’s slab, installed structural footings, and were preparing to pour concrete in the basement. While the concrete cures for several weeks, workers will “continue to work on preparing the site for the next phase” of installing initial framing and structural steel on upper floors.

Cohen wrote in the update that CL Real Estate has remained “steadfast” in its commitment to finish the project, and appreciates the city’s support moving forward. 

“We are still here and committed to finishing this hotel and are making good progress,” Cohen said in an email.

Cohen said in the update the company hired Fox to “double down on our commitment and finish this project.” Gelzer said the company tasking Fox with ensuring the project reaches completion is one of the main reasons he is confident in the project.

CL Real Estate has suffered from similar delays elsewhere. The group announced in 2015 it would renew the historic Kaskaskia Hotel in La Salle, Illinois, according to Shaw Local News. Watson said the company had obtained funding for the project, but it fell through due to COVID-19 lockdowns. The La Salle City Council expressed frustration about delays in 2021, and the city obtained a search warrant in 2022 to ensure the building was still structurally sound. According to the company’s website, the project is still “in progress.”

CL Real Estate is also working on restoring a LaSalle brewpub, but the project has seen delays and is still “in progress,” according to the company’s website. The company has a $3.5 million budget for that project. According to Watson, CL Real Estate has resumed construction after facing obstacles, and expects it is on track to completion.

“Each one of our projects is entirely different with unique challenges, regardless of their similarities on the surface,” Cohen said in an email. “The only thing that remains the same across the board is our dedication to the mission of developing catalytic projects that will transform these communities economically.”

Cohen said the company is still committed to bringing the Keefer project to completion.

“We are not interested in rehashing the challenges we’ve faced; the community has heard it enough times and it only breeds pessimism,” Cohen said. “Our team is continually committed to this project.”

Stockford said he wants to see the Keefer project reach completion, but wants to ensure the city holds all citizens and businesses to the same standard.

“Someone in town has to speak for the residents over an out-of-state developer with a terrible track record,” Stockford said. “This all being said, I look forward to being proved wrong when I’m attending the grand opening of the Keefer this coming summer.”

The Collegian requested a tour of the property, but Cohen said the company could not accommodate because the Keefer is an active construction site.

[EDITOR’S NOTE: This story has been edited since publication to correct building ownership, spelling, and a Keefer project funding source, and to better reflect this project’s beginning and the context of other CL Real Estate projects.]