Northern Explains its Big Investment Downtown

DETROIT-With the recent purchase of the 584-unit Lafayette Towers in Detroit, the New York City-based Northern Group has increased its massive investment into the struggling city. Jonathan Zich, director of special projects for the company, tells GlobeSt.com in an interview Wednesday that the company believes in the resurgence of the Motor City, even as Michigan is seen as the state most in trouble with the current economic woes.

The company has invested hundreds of millions into Downtown Detroit, being owners of the Downtown Collection offices, consisting of the First National, Penobscot and Cadillac Tower, and the 400-unit Alden Park Towers apartment complex. Last week, Northern Group made a major announcement, that it plans to build $150 million retail and multifamily towers called Cadillac Centre in the Downtown. Now, the company is reportedly buying the 22-story, 95%-occupied Lafayette Towers in the city, which had been on the market for $20.3 million, for about $16 million from the longtime owners, the Chicago-based Habitat Co.

The Downtown has had more development going on, with two new stadiums, three large casinos, a multimillion dollar Detroit Institute of Arts renovation and some major office tenants, such as Rock Financial, announcing plans to move there from the suburbs. Zich says the Northern has faith that Detroit will make a comeback, but someone must make the first move. "You've got that constant, people want to live where there's retail, and retail wants to be where people live. At some point, somebody has to take a risk and build apartments, and hope people will want to live there, and hope retail will follow. I've had people from Michigan say they want to live in Detroit, but you can't go to a grocery store, or a movie theater. In order to be a 24-hour city, you have to bring in a new generation of Detroit."Multifamily in the Detroit area has been doing somewhat well, though it could be attributed to the high rate of foreclosures hitting the region. According to the Marcus & Millichap 2008 National Apartment Report, Detroit's apartment inventory will remain essentially unchanged, while demand will pick up slightly, causing vacancy to decline 10 basis points to 6.8 percent in 2008. The company also expects the retail vacancy rate in the Detroit Metropolitan Area to remain at 10% or higher in the first half of 2008.

Zich says the city gets a lot of undeserved negativity. "Most of it comes from people from outside, who haven't seen the city," Zich says. "The people who come with me are usually really shocked, you see the bristling theater district, the stadiums have brought in a lot of people, there was good reaction to the Super Bowl here at Ford Field in 2005. There's just a spectacular amount of good things happening downtown. Yes, they need to work on things like infrastructure and education, but so does every city. Detroit isn't going to disappear."