Ed Shaffran

Ed Shaffran
builder; developer; The Shaffran Companies, Ltd.

Tottered on: 19 April 2006
Temperature: 68 F
Ceiling: sunny
Ground: spring grass
Wind: E at 13 mph

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TT with HD: Ed Shaffran

ES: What's good for you?

HD: Is this going to be alright?

ES: Yeah, this is perfect. I mean, I won't move up and down just because of the motion sickness issue that I have.

HD: Do you really?

ES: Seriously, I do. I can't go on a merry-go-round.

HD: Huh!

ES: Even flying on an airplane is an issue with me. It's been since birth.

HD: Okay, so you've never actually had a genuine teeter totter ride?

ES: Maybe when I was real young, but nothing that I can honestly remember. I know this, that the last time I went on a merry-go-round, when I was probably about 8 years old, I was just white as a ghost, vomiting all over the place. My friends didn't think that was very fun.

HD: Did you literally vomit on your friends?

ES: Well, I probably did.

HD: Well, welcome to the teeter totter.

ES: Thank you, Dave, I appreciate it. Good being here. It's a beautiful day.

HD: It's a spectacular day. I have to say it's probably the very best day we've had so far for teeter tottering. Quite a contrast to the very first one.

ES: Couldn't you just imagine the reason why: I'm here! [laugh]

HD: Oh sure! [laugh] Well, it's quite a contrast with the very first session, which was with René Greff. She set a cold-temperature record that still stands: 25 degrees.

ES: Oh, you're shittin' me! I saw some of the pictures, it looked like they had their winter coats on.

HD: Yeah. She was a real trooper to come out. It had just snowed like 8 inches, and it was cold.

ES: She's a nice lady. Do you know her husband, Matt? They're good people. They are good people. They're a tenant of mine.

HD: Are they really? Are they good tenants?

ES: They're very good tenants. Very good tenants.

HD: Well, you know, it was snowing that day. And actually the mental association I have with your name is actually not as a builder or developer but it's with snow.

ES: Yeah. The snow removal. I got the snow removed.

HD: Right. So I'm glad you still remember that and that you know what I'm talking about. Whenever I hear somebody say, Hmmm, Ed Shaffran, who's that? I'm always right there with the explanation: He's the guy who one year made all the snow go away from downtown.

ES: Yeah, that's my claim to fame. [laugh]

HD: Right, that's why he's important to our community.

ES: Yeah, none of 30 or so buildings he owns and renovates, that has nothing to do with it, it's: He got the snow done!

HD: So how did you actually make that happen? Was it a matter of picking up the phone and calling some guy?

ES: No. I was not Chairman of the DDA at the time, but I was on the DDA and I was probably the most involved DDA member at the time, because of the construction and the goings-on with the parking fiasco. We were getting ready to embark on what turned out to be a 52-million-dollar program. The actual incident that took place was: I was standing in front of my office, which is on 4th Avenue, and I looked to my right which was the north, and there I saw some elderly people at that senior citizen building struggling to get into a taxi cab ...

HD: ... through snowdrifts ...

ES: ... and just shook my head and said, What?! In my mind I said, What the hell's going on here?! It's been a day and nothing's happened. What's going on? And for some reason, either had a lunch with Susan Pollay, or we were talking about something, or we were having a meeting, and I was just unbelievably upset, going, What the hell is Neil doing? Where's Bill Wheeler?

HD: 'Neil' being Neil Berlin?

ES: Right. Neil Berlin. Bill Wheeler, who was head of transportation at the time. What the hell is going on? And I remember saying things like, These son-of-bitches that are in charge of this city, what the hell are they doing?! We're paying taxes here, the City employees are off, getting a personal day, but yet all these merchants down here that work for a living are having to sacrifice whatever?! And I said, That isn't fair! And I said something to effect of 'the decision-makers'. And Susan challenged me by saying, No, no, no, you are one of those decision-makers! And I thought about it for a minute and I thought, Dammit, I'm going to do something about it. I literally picked up the phone and called a friend of mine, Bob Mazur who owns Western Waterproofing. We were doing a lot of work with Western Waterproofing and knowing what I know about construction, knowing that he had a lot of Bobcats, knowing that you're just not going to get certain equipment down there to start moving the snow, that you would need Bobcats that would take it to a bigger end-loader, and the end-loader would put it in the 18-wheeler ...

HD: ... yeah, that's one of the things that was really impressive about it: as a part of the process you created these huge mountains of snow at the intersections. That was a sight to behold.

ES: This was now 1 o'clock in the afternoon. I said to Bob, he was trapped in Florida, he couldn't get back, I remember saying something like, You son-of-a-bitch, you better have me a price by 3 o'clock, because I have a 3 o'clock meeting. Susan had then arranged a meeting with Mike Scott and that particular department. Bob called me at 3 o'clock and gave us a price. I can't even remember how much it was. It was only about 25 thousand or something. I said, You're going to start at midnight tonight. Went to the meeting and Mike Scott and these guys were there, and they were complaining: The City this and the City that; no, the way we do it is we work with the route of the trash; I think everybody knows that. And I am listening to this thinking, I don't believe this! I don't believe you're going to allow the city to be in peril for days and this is the system? What the hell are you doing about downtown? Well, nothing! I was absolutely beside myself. And so I said, Dammit, I'll take care of it then!! And I walked out of the meeting. I don't think anybody really knew what I was going to do. I went home came, back downtown, and I'll never forget, there's Judy McGovern and, I want to think, it was Marianne Rzepka. Marianne and Judy McGovern [Ed. note: journalists with the Ann Arbor News] were down there on South U. at 12 o'clock at night. I am in my blue jeans and my loafers and my winter coat directing these guys on where to start on South U. I stayed there for about an hour or an hour and a half. And then it just started from there. The next day we kept going, and then, of course, it got headlines in the paper and it just kept going and I wouldn't let up. Finally I had a meeting with Jim Stein and Mike Scott, I think two days later. I think Susan was there. And Michael, who's since retired, looked at me and said, Have you had enough?! And I said, What? Of embarrassing the shit outta you bastards?! or something like that. And I said as long as you can take care of it from here ... [phone ringing] ... I'll shut that off, sorry, so anyway ... [Ed. note: bottled water spills onto ES's trouser leg in the course of turning ringer off]

HD: ... hey, the way that balled up on your pants, are those like nano-pants or something?

ES: Yeah, those are those new ones where water repels off it. I didn't know that either!

HD: Wow, that's pretty good!

ES: That was pretty slick!

HD: Do you remember what year that was? Was it '97?

ES: I think it was. I think it was January of '97 or '98. That's when I relented. I said, Okay, Mike, and then I was involved in a couple of meetings thereafter as to how they were going to start working it. But Jim Stein, who now, ironically, works as a consultant for the DDA, was really the one who got things going with Mike as far as how they were going to systematically take Western [Waterproofing] and get them to do this. They brought in some bigger equipment and things like that. As it turned out, all the money was reimbursed because of federal emergency or however the feds work that. So they reimbursed the City for that cost, so there was no cost to anybody.

HD: In the April edition of the Ann Arbor Observer, there's a shot of you sitting on the ledge of the First and Washington site. And then I think it was last week in the Business Review, Paula Gardner has a piece in there where you're featured prominently: a photo of you reading a blueprint. A classic developer shot.

ES: Yep. Great pose, isn't it?

HD: But no hardhat. You didn't go for the cliche of the hardhat.

ES: Well, you know that's an OSHA deal. We always want to make sure that we always tell the photographer, Hey, you gotta remember this is for photographing purposes only.

HD: Right. And now you're riding the teeter totter ...

ES: ... no hardhat required, right?

HD: Right, no hardhat required. But given this all this recent publicity you're enjoying, are you sure you're not running for some kind of public office?

ES: Dave, I'm going to tell you: the furthest thing from Ed Shaffran is any kind of public office. Absolutely not.

HD: You're not even contemplating it?

ES: Not even contemplating it. I have no aspirations for anything political. Probably the only thing I would do politically is make contributions. Obviously, I'm a Republican ...

HD: Why is that obvious?!

ES: I don't know! Isn't 'capitalist' written across my forehead?

HD: Noo.

ES: But seriously, there have been people in the Republican Party who have said, We'd love for you to run! And I've said, You've gotta be fuckin' kidding me! I mean, I've always been a person to express myself. I think my mom and dad said even as a kid, if I thought it was black it was black, if it was white I would say it was white. Not from an argumentative standpoint, that's just Ed Shaffran's nature. I'm probably rough on the edges. I'm not polished and clean when it comes to, Oh, I might hurt somebody's feelings! My feeling with that is: You'll get over it. If you don't, I guess you got a problem! So none.

HD: So not even something that is relatively non-partisan, or at least I think they're non-partisan elections: school board elections?

ES: I've been asked to do that.

HD: Recently?

ES: Yeah, the new building and all that ...

HD: ... one of the quotes from the piece in the Business Review struck me as interesting, this was regarding the Suzuki building, you said, You know, anybody can build a new building.

ES: Yeah!

HD: And I thought, Hmm, there's some people in the community who would say, I'm not necessarily one of them, but who would say that the school board is trying very hard to prove you wrong.

ES: Well, unfortunately, you're asking the wrong guy there, because I was the guy who voted against the new school. ... ... ... I can't officially say I'm a native because I was not born in Ann Arbor, I was born in Bayer Hospital in Ypsilanti. And I lived in Wayne, Michigan for the first 8 years of my life. Then I came over here in, I think, the third grade. So I can't call myself a true native.

HD: Where'd you go to elementary school?

ES: Carpenter.

HD: Did they have teeter totters?

ES: I don't remember! I remember breaking my arm there at school, though.

HD: Holy Cow!

ES: Yeah, I remember blocking a soccer ball or kick or something and broke my wrist.

HD: Sorry, I sidetracked you! You voted against the new school?

ES: I voted against the new school. I just don't know where all the students are going to come from. Hieftje has talked about regionalism. Why aren't we doing the same thing with schools? Just from a fiscal responsibility. Forget politics. Doesn't it makes sense to combine a lot of these facilities? How many supervisors do we need? Think of all the supervisors: every school system has to have a supervisor ...

HD: So what you're proposing is something like a Washtenaw County Consolidated School Corporation?

ES: There you go. Exactly. Granted, you're going to eliminate what, in my opinion, are top jobs. I think there's a tremendous need for teachers. I'm all for paying teachers a good salary, because those are the people that educate our children and I'm all for that. I think that's a very very important factor: good education. There are a number of things that I disagree with that the federal government imposes upon our school districts ...

HD: ... so you're referring to No Child Left Behind stuff?

ES: You know, Dave, I really don't know what all that is about. I'm not one to have been a student of reading all of that. But I really don't know what it is, so for me to answer, I don't. I'm a big believer in what I understand to be the European system, where you basically go to school for to seventh or eighth grade and you have a test. You are either college-educated type material or maybe you should be going toward the trades. I don't know what they call it, something with 'Technology', with the Washtenaw Community College, where they're taking these kids out of high school and they're going to Washtenaw Community College?

HD: You know, I don't know what the exact name of it is. I can look it up and fill it in [Ed. note: what ES and HD mean is the Washtenaw Technical Middle College]. But I remember, I believe it was an Other Voices piece in the newspaper from a student there, who was objecting to the new state graduation guidelines on the grounds that they didn't accommodate what's going on in that particular educational program. That if you mandate, You must have four credits of English to graduate! that they wouldn't necessarily accumulate four official 'credits' of English and they would not then be able to graduate under the new proposed guidelines. It was an interesting angle on the topic. When you say we ought to raise standards and require credits, on the surface it sounds great: Sure, we're all for education, so we're for it! But when you look a little deeper, it's more complex that that.

ES: I think that we all need the basic education. We should all know how to read. We should all know how to write. And we should know a little bit about arithmetic. Not math. Add, subtract, multiply, and divide. I don't care if you know trigonometry, and I don't care if you know algebra. You gotta be able to go the grocery store and if it says 10% Off, 20% Off, you should be able to do that. You should be able to balance a checkbook, even though with the internet and all that kind of stuff you don't have to worry about it today, but still ...

HD: ... so where does the internet figure into a basic education? At all?

ES: Oh boy. That's a scary one, Dave. Seeing how that's going to be our big future, right? Probably for a kid it'll come naturally. Do you have children?

HD: No.

ES: Okay, when I want to program my VCR and that, I used to ask my 10- 12-year-old daughter how to do it, right? They just know that stuff better than we do! Naw, I mean, I can do that stuff. I'm one of those who can actually program that. You don't have to come to my house and see the blinking 12 o'clock all the time.

HD: Okay. I might knock on your door some night and check that out.

ES: Boy, the internet. Those who have computers or access to it, what a wonderful opportunity and a gateway, if it's used correctly. I don't like the idea of all this porn and stuff like that, but at the same time, I believe in freedom of speech. So I'm not going to be the type of person to say, Hey, you can't do that, because I don't want to be a hypocrite in that respect. You just hope that decent people make decent decisions.

HD: My fantasy is to be able to do these teeter totter interviews out here with a laptop hooked up to the Wireless Washtenaw network.

ES: Yeah, there you go. I'm on that committee.

HD: Yeah, I know. That's why I brought it up, because I wanted to talk to you about that, Ed!

ES: [laugh] Well, we're just an advisory group. Do they listen to us? Well, probably.

HD: I thought it was interesting that the category of person you're listed as ...

ES: Am I under 'Asshole' or 'Flaming Asshole with Hemorrhoids'?

HD: [laugh] No, you're under 'General Public'

ES: Oh right, I think I am one of the two public people.

HD: Yeah, you and Jeff Rinvelt.

ES: Right. And there are some good people on there. Bright people.

HD: So what's going on with that? If you look at the timeline, it says by the end of 2007, the thing is supposed to be done. By the end of 2006, they're supposed to have a service provider actually selected with a contract signed.

ES: My understanding is, at our meeting, which is coming up in a couple of weeks, we'll be making a decision on what provider. I know that the governmental committee has been reviewing them ...

HD: ... so all the bids have come ...

ES: ... all the bids have come in ...

HD: ... because initially they had to extend the deadline because there were no bids?

ES: That is correct. I think the reason why was because of certain changes in a couple of the companies, I guess SBC and AT&T, those type of things, they extended it. Plus, there were some opportunities that maybe would have helped enhance it. And because we're a government organization, we have a right to modify and change our contracts and so the committee agreed to extend it and modify it. And so that's what happened.

HD: So is there anything in this for you at all? They'll need to build towers or put antennas on top of buildings ...

ES: For me personally? No. Actually, a lot of it, they're planning on using the public infrastructure that's already there. So there won't be a duplication. They have an inventory of all these various buildings, of poles, of towers, U of M owns this, and Washtenaw County Road Commission owns this, and the heights of each one of these. I don't know the semantics of it, but there's a certain technology today. But the future technology two or three years away is called blah-blah-blah. And that blah-blah-blah is not as concerned with heights, because of the way that the radio waves or signals can transmit themselves. And the distance is further. So it's like we're planning for Technology A, but we really need to design it for B.

HD: So it sounds to me like it wouldn't be possible to use the Wireless Washtenaw project as an excuse not to build tall buildings in downtown Ann Arbor.

ES: No. Which is all interesting, the tall building issue. You know 14 stories, to me, is not tall. But it is for Ann Arbor. They're skyscrapers.

HD: Well before we get into tall buildings, I wanted to stick with the Wireless Washtenaw for just a second, because in the mail today we received a postcard asking us to vote Yes on Proposal A. Do you know what Proposal A is?

ES: I have no idea.

HD: It's the the emergency response unified radio network ...

ES: ... oh is that for the police and all that stuff for Washtenaw County?

HD: Right. So I believe it's a county-wide millage that will allow for a unified radio network. I don't know enough about the technology to even have an opinion, but the idea of a county-wide wireless broadband system, and then this emergency radio system, it seems like there's at least the potential, with wireless broadband available everywhere in Washtenaw County, that you wouldn't even need this emergency response radio network.

ES: This is news to me, first. The only thing I could say to that is ... the wireless has a franchise aspect. I know when it comes to emergencies, it's a completely different bandwidth. And then the question would be: who would own that versus the wireless? I'm sure someone's got the answer for that, but that has not come across ours. When we meet, I'm going to bring that up: why does there need to be two? That's a great question.

HD: It's probably a simple and stupid thing that if I had any clue as to what these two technology systems were, it'd be obvious. Okay. Tall buildings. The Suzuki building, that's not very tall.

ES: No, it's not. It's two stories. In fact, it's probably shorter than the height of your house!

HD: I believe it is. I rode my bicycle around that neighborhood this morning, because I wanted to see what it exactly looked like, so that I could picture it in my mind as we talked about it. Stephen Rapundalo, when he was on the teeter totter, he mentioned that building and he wasn't sure if you had that building. I think it's a lot further along than ...

ES: ... it is! There's a lot going on inside. We typically operate under a third-party name, so when you see the entity called 'ECD Associates', or '1012 Pontiac Street', or whatever, you don't know who it is. We don't do that intentionally, but that's just the way we do it.

HD: Yeah, there's not a big sign that says, 'Another Project Brought to You by Ed Shaffran!'

ES: Yeah, right. In fact we get a lot of criticism that we don't advertise. I have received probably three or four dozen inquiries, and it's strange how they come to us. Most people will say, We called the City to find out what was going on! It's not like the City has called and said, Hey, Ed, why don't you put a sign up? But they'll speak to the Building Department and they'll say, Yeah, Ed Shaffran, here's his number.

HD: Well, the Suzuki name is still on the side of building in giant letters. I assume that will come down eventually?

ES: It'll come down when we're physically at that part of the building cutting some holes.

HD: So what's going to happen to the lettering? eBay?

ES: Yeah, we'll put it on eBay!! No, we'll probably put it inside one of the units. Someone will want it.

HD: You think so?

ES: In fact, we thought about leaving the Z-U-K-I for 'zuki'. Maybe we should call it the Zuki Building.

HD: The people out at Zukey Lake might have something to say.

ES: But that's with an 'E', right?

HD: Oh, I don't know, it's spelled in a weird way. Okay, well, if you actually take the sign and put it in one of the units, then I might be convinced that, as you say in the Paula Gardner piece in the Business Review, that these are going to be 'funky'.

ES: Yeah, I hate the word, but like I told her, give me another word, Paula, instead of 'funky'!

HD: Well, just as a reader of that article, and just as a reader now, another word that might come to mind would be 'overpriced', Ed?! [laugh] I mean 2000 bucks for, what is it, 1100 square feet?!

ES: [laugh] Actually, Dave, we get about 22 to 24 hundred dollars for smaller apartments in the downtown. Being the true loft apartments rather than the garden variety apartments, yeah, they're pricey. Why are they pricey? Well, because they cost so much to renovate. There's a handful of them, there's a limited supply, it's supply and demand.

HD: It's 13 units, right?

ES: Thirteen units there, yep.

HD: To the west of the structure where the units will be, it looks like there's at least room for 25 parking spaces.

ES: Oh, 35 or 40!

HD: I was trying to just eyeball it and it seemed like there was at least enough space for two spaces per unit.

ES: Two spaces, plus. Yessir.

HD: So is that whole area going to be parking lot? Or ...

ES: We'll actually create a little more landscaped area.

HD: Like a little green island, maybe?

ES: Like patio areas, green space, whatever you want to call it.

HD: To make it feel a little less 'hard'

ES: Yeah, it won't look like an industrial parking lot.

HD: Just a suggestion?

ES: Please.

HD: As much as I would like to retain a teeter totter monopoly ...

ES: ... put one there?

HD: Yeah, put like a little green island in the middle of the parking lot and install a teeter totter there.

ES: Hey, fine with me. We could do that and you could conduct your interviews over there.

HD: Well, I'm not saying I'd do that.

ES: Public space, there you go!

HD: Parking seems to be on people's minds. For that particular project, I guess it's not an issue as far as satisfying tenant demand. But in general, is it fair to paint you as the kind of guy who never met a surface lot he didn't like, or?

ES: [laugh] I don't know. In relation to parking or in building?

HD: Or whatever. I guess really I'm not so much asking a question as much as just turning the conversation to what your thoughts are or your philosophy of parking for downtown is. Say you have to drive downtown and have dinner at the Earle. What's your parking strategy?

ES: I don't necessarily believe that in the downtown you're going to be able to park right out front like you would at a shopping center. Not to say that even at a shopping center you're going to be able to park. I think there should be relatively convenient parking. If I may digress for just a moment on that. When I was Chair of the DDA and pretty responsible for the implementation of the repair and replacement program, I was on public record to say: All we'd like to do is rebuild what we have; that as new units come on, whether it be more office or residential, that pursuant to the commitment that the Councils back in the 70's did, because of everything going on out at Briarwood, the downtown would be a parking-exempt district and the City would provide it. I'm a believer in that. I don't believe in just building a parking structure because, quite frankly, they are ugly. Other than maybe the one at Fourth and Washington, a very attractive-looking parking structure. But they're a habitual maintenance problem. Yes, they are an asset, because we, the City and the taxpayers, own it. It does provide a service, but one that, quite frankly, private industry has been shunned away from. If you look at the zoning, there is no parking zoning. I, as a private citizen, or you, as a private entity, cannot build a private parking structure. There's no zoning for it. Now, I can build a building that has parking associated with it, but ...

HD: ... so take the First and Washington lot which now stands empty. It's not possible for a private developer to come along and say, You know what would be perfect here is a single-use structure called a Parking Structure?

ES: There is no zoning for it.

HD: So it would have to be the DDA itself that said, We, the DDA, are going to build this?

ES: The only, ... and just out of the blue, I've never thought about it before, I don't even know if you could get a PUD as a private entity. If you and I go in and say we want to buy this and we want to build a 600-space structure. I don't know if we could do that. Because a PUD is a Planned Unit Development. And there's certain criteria with it. And the only district that is for parking is for government.

HD: So the First and Washington lot, I suppose there was a reason why the people from the Observer perched you on that ledge and shot your picture there?

ES: Yeah, because I had been on the record, going back to what I just said earlier. There were 250 spaces there to begin with. Replace the 250!

HD: So do you have, I mean they've sent out a request for proposals for the First and Washington lot?

ES: They have.

HD: Do you have ...

ES: No, we will not partake. We did in the original one. We spent 20 or 25 thousand dollars putting something together ...

HD: ... this was for the 3-Site Plan option?

ES: This was actually before the 3-Site Plan. This was back 1999 or 2000 when they came out with the RFP there. And if I recall correctly, of the five or six proposals, we were the only ones that put a package together that met the guidelines of the RFP. They ended up dealing with Freed, which their deal had nothing to do with the RFP. So it was kind of, What was all that about? So, a little bitter. There's nothing wrong with losing if I had a fair shot at it. But when you start putting things like that together, it's not for free. I think we had 20 or 25 thousand invested in it. That's a lot of money to just piss away. And to be thrown out like, Hey, we don't want you! So I learned my lesson there and felt like I wasn't going to get involved in the next one. I'm going to do what I know I can control.

HD: So that's based not on how attractive that parcel is and what might be possible there, but it's based on what you anticipate as far as being given a fair shot?

ES: Yeah. I think it's admirable what the DDA wants to try to do with some type of work-force housing and that. I'm a realist. I used to be a super-optimist, but I guess through time and reality, I've become more of a realist. It's simply: How do you take the most expensive property in the city, and say you're going to make it 'affordable'? The project known as Lofts 320, on Liberty Street next to Seva, that was my deal. We sold it to two guys from Royal Oak. Two real good guys. We were going to do 14 units. They modified the plan and did 20 units within the same square footage. We were just doing bigger units.

HD: So remind me, this was the one where ...

ES: ... we were the bastards that tore the house down!

HD: As I recall, the Historic Commission approved the demolition, right?

ES: You got it! And then they spanked me.

HD: So the project foundered at the doorstep of the Historic Commission.

ES: Through that project, through my numbers, we were at a pure basis of over 225 dollars a square foot to build the building.

HD: That's the to-build-it cost?

ES: Yeah. And we haven't put any land cost into it, yet. So you're upwards into 240-250 a foot. Put yourself into the capitalist mode. To make any money, assuming that you're going to sell all 20 units at once and close ... and you can look at it from the perfect hypothetical situation down to, Gee, we're going to sell 10 and then it's going to take another year or two to sell the other 10, so you do some kind of a scale. You start thinking, well, what do I need to sell these at to make money? A good example is the Ashley Mews. Any other entity other than a Detroit Edison would have been bankrupt. There's no way you can hold the project that long and pay the interest-carry and the property taxes and insurance on property that you've built, but not yet sold.

HD: Yeah, it's finally sold out, though, right?

ES: Right, but if you and I did that as a private development team, we would have filed for bankruptcy. We would have never made it.

HD: So you're saying if a regular private developer had done Ashley Mews, that those units would have had to have been priced even higher than what they were?

ES: Easily. And then still prayed to God that they sold quickly, because if they didn't, then you are what we call in our industry 'upside-down'. You're upside down because your cost to now sell it is greater than what you have into it. That's a reality. So you say, Gee, I have to sell these things for 350 or 370 a foot to make some money. By nature us developers are capitalists. We thrive by making money. The interesting thing about that is that it's what we call 'ordinary income'. And ordinary income is, you're taxed at 39% for the fed plus alternative minimum tax etcetera, you're probably technically in a 50% tax bracket. Maybe more. So for every dollar you make, you're giving back half of it to the government. That has to play into how much money you're going to make, because in the end, did you just trade dollars or did you actually lose money? It's an interesting game.

HD: So how are they, the guys who you sold the property to on Liberty, how are they finessing this?

ES: They did not start until they physically sold all 20 units. They have signed contracts by people.

HD: These are for rental or?

ES: No, these are for ownership. They are under contract. So you and your wife could have gone in there and signed a contract for 350 thousand. Probably initially to hold it, you gave them 5 or 10 thousand dollars and then, when you signed the contract, you probably gave them up to 20% down. So by way of example, you had to put up 50 grand. So then what most likely will happen is, when certain things happen, like, for example, when the shell building is built and the roof goes on, maybe you have to give them another 10% more. And then when this happens, and that happens ... So basically you're required to give progress payments. That's certainly one way of doing it. Another way is you just hold your money and when it's done you pay them off. A number of ways to do that. Now if you were to say, Hey I want out! then there's a default clause, which would probably say you forfeit the 50 grand or we'll work out an agreement. You're probably going to have that: somebody's going to fall off. It's a reality that some people will fall out, because of bad times or whatever. Think about it: you and I signed a contract, but you can't move in for two years?! A lot can happen in two years. You better know what the hell you're doing! So with that in mind, I stopped and asked everybody: Those are only 20 units; there's 1500 units being proposed for downtown; how many more people are out there, who are willing to do that? And let's face it, the taller you go, the more expensive the construction gets. Why is that?

HD: The more expensive per square foot??!

ES: Yes. Why? Buildings that are four stories and less can be built with masonry and wood. You can still use wood up to four stories. Technically, four and a half, because you can build a mezzanine, a mezzanine is no more than one third of the floor below it, for free. Once you go over that, it's concrete and steel. There's fire ratings, there's all kinds of issues that go up to another dimension, I think it's 88 feet, then there's a whole new set of rules, which talks about evacuation systems that have to sit on the roof for smoke and fire, and that's just more expensive. So you have your basic cost, which is basically a housing cost, then you get into concrete-steel, and you only have to look at what the cost of concrete and steel is today, and then of course you get into elevators.

HD: It seems to me that if you look at the cost per square foot of, say a 6-story building, so something like the minimum height that still requires concrete and steel, from there upwards you would start to reduce your building costs per square foot?

ES: You theoretically think you would, but the equipment that's required: it's just a different crane, it's a more expensive crane. Now your base has to be bigger, your footings have to be bigger for a taller building. Again, the building codes, the type of materials, the safety material aspect of it, window size, strength, you've got wind sheer elements, and all that requires different types of materials than that window you'd put in a four-story or a six-story building. Safety: more staircases are required. Possibly a second elevator. I'd agree with you, probably between 6 and maybe 10, the dollars per square foot is minimal. Once we get over nine stories or ten stories, we jump to another level. True construction costs are probably at 150 dollars a square foot, but by the time you add interest-carry, architectural fees, engineering fees, insurance, blah blah blah blah blah, soft costs, overhead, things like that, there's another 50-75 dollars a foot. So to build a building with 20 units is one aspect, but now coming in and doing 90 units?? 100 units?? I mean, this is no longer a 4 or 5 million dollar project. This is 25, 30, 40 million? You got to have some pretty big gonads to be going in on those deals!

HD: You said 'windows' and 'window-size' in connection with wind sheer. One of the things you seem particularly proud about in connection with the Suzuki building is the size of the windows.

ES: Yeah!

HD: You're going to put some big-ass windows in there.

ES: Yep. And that's been an engineering challenge.

HD: So who came up with that basic idea? Did you say, Hey, I think I'd like to put some huge windows in here! Or was that an architect working away in a cubicle somewhere who said, Hey, I think big-ass windows are the way to go for this project!

ES: No. I think light, glass, I think it sells. Jeezus, I don't even know how to answer that. It's a different look. I think people want to look to the outside. We had an opportunity with these heights and we had to do something. Just like your house, you wouldn't just have the door and that window and then have that wall up there. You'd want light. If there's a bedroom, you've got to have a window. It's required under the code. We maybe took some of it to extremes. But the nice thing about a window is, you don't have to paint it. It's pretty much maintenance-free. I don't have to put electrical there. It's just like when you build a wall, you can use studs and put drywall on it and paint it. Well, there was a cost to all that. Now we've got to put insulation in it. And now we've got to put electrical in it, and we've got to put plumbing through it, we've got to put siding on it, oh, and then we've got to get it painted. When you start adding all the dollars that are associated with that wall ...

HD: ... so you're saying that a window is cheaper to build than a wall.

ES: Yes. On a dollar-per-square-foot basis. Because when it comes, it's finished. I don't have to paint it, I don't have to put wire through it, I don't have to put pipe through it. It's done.

HD: But for the Suzuki building, for the size of the windows, you've had to enlarge the openings, right? And you've had to set new block along the edges, and so I guess there's an aesthetic challenge to making the exterior blend in together, so it doesn't look like somebody just took the concrete block building and sawed around on it.

ES: You would have put some opening in there to begin with, whether it would have been a 3-foot by 5-foot window or whatever. We elected to make it 6-foot by 16-foot. As to the additional cost, once they're there saw-cutting it, it's five more minutes, it's ten more minutes, it's a few more blocks knock out. I would have had to finish it, if I didn't take it out. That was the rationale. And aesthetics. I probably just wanted to piss away some money! [laugh] I don't know. You're asking me a question I don't have an answer to!

HD: So what else is on your mind? You said you were doing a lot of traveling in one of your emails. Was that building or vacation, or?

ES: A little bit of everything. Been looking at Grand Rapids for some time. A good friend of mine, and my architect, Mike Korby, lives in Grand Rapids and his main office is in Grand Rapids. We have looked at trying to do something there. It's like Toledo. You can buy a building for less that 10 dollars a foot. Buildings that I would be drooling to have here in Ann Arbor. Neat, industrial-looking buildings. The latest project we were looking at is a seminary in Grand Rapids. It sits on 20-some acres of land, just shy of 200 thousand square feet of buildings. And let's face it, you would think that probably the Catholic Church builds buildings like the proverbial brick shithouse. I mean they are well put together. Gorgeous buildings. We can buy the whole thing for less than 5 million. Right in the middle of Grand Rapids. Now, if that existed here in Ann Arbor, why, you'd be talking 20 to 30 million, or maybe more, to get a hold of something like that. And ironically, the challenge is to make it work economically. In Grand Rapids you might be able to construct probably for 30 to 35% less than Ann Arbor, simply because of the unions and things of that nature. And, of course, Grand Rapids welcomes builders. They actually like builders over there. It's not like they don't like them here, it's just that the process is a lot different.

HD: They go the extra mile somehow?

ES: Yeah, they actually say, Hey, come on in! Thanks for coming in! You know, they welcome you! But we just can't make the numbers work. Like Toledo. You go to Toledo and you can buy that same building we're talking about for two or three dollars a foot. Looked at Florida. I continue to look at Florida. Florida is a completely different game. They don't have the type of building or infrastructure that we like. If you go down to Stuart or Jupiter, Florida, it's two to three-story buildings that are very modern-looking. So my deal wouldn't work of going in there and renovating an old building and renting them out as loft apartments. They don't have that look. I've learned that if you do something well, stick to it and try to stay in that geographic area. You need to be a big player in Florida to do deals. Since there's no personal income tax in the state of Florida, there's a lot of fees that they charge builders. For me to go down there and maybe buy an old apartment building and renovate it, the economics just aren't there. We've looked at Chapel Hill, we've looked at Columbus. We've looked at a number of college areas. First and foremost, it's not in our backyard. We're an outsider, so would we be treated differently? You know, it's not like I've got a big empire of people to work with me.

HD: Well, I'm a big fan of staying in one's own backyard.

ES: Yeah, I can see that! Have you left here lately? [laugh]

HD: You mention Florida, a totally different state. When you look at the state of Michigan, the Michigan economy, do you think there's any hope for Michigan besides getting Detroit back on its feet? I mean without a healthy Detroit, do you think it's even conceivable that the state of Michigan can dig itself out of the mire?

ES: I don't know how they can do it. Not that you want to say it's a hopeless cause. But we are so dependent on the auto industry. If we pick a number and say, Well GM will probably be somewhere in the 20% of the market share and Ford will have blank percent. And we know that's what they're going to have and how many people do they need to support that? And then start from there. Because don't forget, they used to have 50 or 75% of the market share. Look at how many jobs and people they employed then. But I don't see that. I don't see that Detroit or Michigan in general is going to be able to compete with the Alabamas the Georgia's ...

HD: ... the Tennessees ...

ES: ... because of A, the labor cost. That may change, but if we're paying a person the equivalent of 75 dollars an hour with benefits here in Michigan, if that's the number I continue to read, I don't think that's the same number they're talking about in Tennessee.

HD: So you think maybe it's worth it to just say, Let's give up on the auto industry and put our energy and creative talents into a different sector?

ES: I don't think there's any question. I don't want to say, Give up on the auto industry. They are a market. They produce a product that employs people. And we should certainly continue to make it attractive for them and their competitors to come into our state. But realize we need to be looking elsewhere. Maybe it's medical. Maybe it's computers. Whatever it is, let's start looking at it. I know this sounds awful, but my daughter graduates from Ann Arbor Huron in literally sixty days or seventy days, and my wife and I have made a conscious decision a year or so ago, to say, Get out of the state, Go away to school! And she has chosen the University of Central Florida down in Orlando.

HD: Okay, when you were talking about your travels to Florida, now I see some connection ...

ES: ... there's a little bit. So now we'll look for something in the Orlando area. Disney would be nice! We'll put in an offer to buy Disney!! [laugh] But I'm thinking, Am I doing the right thing for my daughter by telling her to look elsewhere?

HD: So when you talked to your daughter, did you explicitly say, I really prefer that you go out of state?

ES: There were a number of conversations, but I think the gist of it was ... I call her Boo, her name is Carly, but I call her Boo. Boo Boo, so Boo.

HD: So this is after Yogi's little friend?

ES: Yeah, Yogi and Boo Boo. Because she was a tiny little thing. So we started talking probably a year or two ago. She started talking about, What do I want to do? and college and things like that. I said, if I had the opportunity, if someone said, Ed, you'd start all over, where would you be? Well, it'd be south. Why? Well, A, the weather. The weather's a hell of a lot nicer 365 days a year or at least half the time than Michigan. Now granted, they've got some issues. They've got hurricanes they have to deal with. We have tornadoes. We have snowstorms. There's an equalizing factor. Is there a perfect city? Probably San Diego, because of the weather. But I think California is the land of fruits and nuts and I'm not going out there. So I said, I'm never going to tell you what to do. You've asked me for advice, so I'll give you my opinion. And my wife and I really talked about it and ideally we would like to be down during the winter at some point. We don't ski, we're not winter enthusiasts anymore. The opportunities, the population, seems to be moving toward the south. So whatever you do, maybe this is where you need to be. At least start down there. I'm not saying you have to end down there. You can always come home. This will always be your home, so you're always welcome back home. Do you want to get into the real estate business, because I could start you out pretty nice, you know! I do have a few buildings you could help me manage with, honey! But that's how we approached it. Should we be encouraging her to move elsewhere? Yeah, I'd stand up and say that to everybody. Why are you telling your daughter to leave Michigan? Because I think it's the right thing for her. Is it the right thing for everybody? I don't know.

HD: How about if I take your picture?

ES: You can do whatever you want. That's fine. Is my hair okay, I mean do I look okay? [laugh]

HD: Oh yeah! [laugh]