Trailside45, a 74-unit apartment complex on Garfield Avenue billed as an “affordable housing” solution for young professionals when it opened in 2018, has been sold to new owners and is being converted to condominiums. The price of the units – up to $300,000 for a 961-square-foot unit – and their potential use as short-term rentals has drawn criticism from tenants and city officials grappling with a shortage of year-round rental housing.

Traverse City investment firm Cochran Booth & Co – under the name T45 Acquisition Co. LLC – finalized the purchase of Trailside45 last week from Alpha Development/Westwind. In a press release, Managing Partner Turner Booth said that “downtown Traverse City has become unaffordable for many first-time home buyers” and that “by converting Trailside45 to condominiums, we are reintroducing the opportunity for families and individuals to own a home at a reasonable price point and live close to everything Traverse City has to offer.” Condos will be priced between $200,000 and $300,000, according to the release, with real estate broker HomeWaters handling the marketing and selling of units. Units range between 604 and 961 square feet in size.

Trailside45 tenants received notification of the conversion plans this week. According to documents distributed to tenants, the third and fourth floors of the building will be converted first. Tenants are being given a required 120 days’ notice and can remain in their unit until that time or until their annual lease is up, whichever is longer, after which they will need to vacate the building if they haven’t purchased a unit. When the third and fourth floors are sold out, owners will begin preparation work on converting the next floor. “Demand will determine pace as the process continues from upper to lower floors until all units are converted to condominiums,” documents state, a process expected to take two to three years.

Christian Berry, 23, lives with a roommate in an 890-square-foot, two-bedroom apartment on the fourth floor, for which the duo pays $1,550 per month (the rate includes several utilities). Berry says sharing the apartment was one of the few affordable solutions he found in Traverse City working at AmeriCorps by day and Horizon Books by night. Berry balks at marketing language calling the sales price for Trailside45 condos an “attractive price point,” saying that even if he committed to a 30-year mortgage for the $289,000 asking price and was able to come up with the $28,900 down payment, his monthly payment would still increase by $350.

“These condos are being sold at what I would deem an outrageous price…it seems very predatory, even if it’s legal,” he says. “For some, it may be a great opportunity, but a 30-year mortgage for a property that doesn’t include a garage or a yard or a lot of the privacy you think of with home ownership doesn’t make sense to me. With the price increase, it just seems like a quick way to push folks out. I hope someone doesn’t take that risk just to maintain a housing option, but unfortunately they may be in that situation.”

George Cochran of Cochran Booth & Co tells The Ticker he understands some tenants may oppose the conversion, but defends the project as a “great opportunity” to help young professionals and other tenants make the transition from being renters to homeowners. “With interest rates being what they are right now, you really need to do that comparison of renting versus owning,” he says. “This is a terrific time to have the opportunity to convert from being a tenant to actually owning something. They will have the first choice (of units), there is financing readily available.”

Cochran says he’s a locally based investor who is committed to the community, aiming to offer a diverse range of housing at price points ranging from the Garfield Oaks mobile home park to what will now be the Trailside45 condominiums. Though representatives from Alpha Development/Westwind could not be reached for comment, Cochran points out that their sale of Trailside45 to his investment group will give the former owners the capital needed to build their planned new South 22 apartment complex on LaFranier and Hammond roads next to Ridge45, which they also own.

“Think of this as recycling,” Cochran explains. “We’re recycling the capital so they can go and put in two times as many rental units as we’re taking out. And we’re creating affordable homes for young professionals. You can’t look at one project in isolation. There is just as much demand for the price level we’re offering these (condominiums) at as there is for rentals. I think it’s a really good thing for the community.”

City officials, however, worry about whether the Trailside45 condos will actually be used for year-round housing. City Planning Director Shawn Winter notes the building is in a C-3 zoning district. Unlike some city districts that limit vacation rentals to 25 percent of the total units, C-3 has no limits on short-term rentals. “Every single one of those could be a short-term rental,” Winter says. “That would essentially be a de facto hotel. That’s troubling to me, because my impression as a community member was that the bill of goods being sold was that this was workforce housing. Four years later, it’s an about-face.”

Blake Bernard of HomeWaters, who is the primary salesperson for the condos, says the goal of the building conversion is still to have a “vibrant community of local residents.” Condo owners will be able to rent their units as vacation rentals, he says, but there will be limits: three times a year for a minimum of seven up to 30 days. “This opportunity for limited short-term rentals can help (offset) costs of ownership, while also keeping the community of long-term residents as owners instead of just investors,” Bernard says. Short-term rentals will be required to go through an on-site management company. Cochran adds that his investment group specifically picked HomeWaters to represent the condos because they deemphasized vacation rentals, unlike other firms that vied to represent Trailside45 and advised the new owners to maximize profits by going with all short-term units. While the restrictions will initially limit how vacation rentals operate at Trailside45, Cochran acknowledges that the homeowners association (HOA) formed by the new condo owners could eventually set their own rules for short-term rentals.

Traverse City Mayor Jim Carruthers believes the changes at Trailside45 could necessitate a city discussion about extending the 25 percent cap on vacation rentals in certain districts to all areas of the city, so that “we don’t get overwhelmed with vacation rentals.” He remembers being at the Trailside45 ribbon cutting and points out that partners like Venture North and Traverse Connect helped secure the property at a below-market rate from Chemical Bank on the promise the site would offer workforce housing. The city also surrendered a purchase option on part of the property to support that housing goal. “There’s not much anyone can do now, but it does raise a challenge when people come to us with these housing projects of figuring out how long it’s actually going to be affordable,” Carruthers says.

As for Traverse Connect – which heavily touted the project as a “below-market” rental option for young workers – President and CEO Warren Call says the organization’s small interest in the building had been paid off and that Traverse Connect had no “decision-making authority” regarding the sales transaction. Call wasn’t with Traverse Connect when the original development deal was put together, but believes the organization can still be proud of “the little bit we could do to increase housing inventory in the community,” echoing Cochran’s comments that both rental and home ownership options are needed. Call says the project illustrates the “real challenge involved with providing housing inventory that’s affordable in this environment” and says Traverse Connect will continue to help however it can in tandem with other community partners.

“I think the real solution we’re pushing for is coming up with public-private partnerships,” Call says, “encouraging the city to look at more housing density in the urban core, and working with partners like Housing North and the Housing Michigan Coalition on statewide ways to address housing constraints.”