Incentives Attract Multifamily Into Downtown

DETROIT-The city of Detroit hopes to entice more than 2,000 people to buy homes or signcondominium or apartment leases in the city’s downtown area by the year2006, when the Super Bowl will arrive at the new Ford Field.

This goal is being realized, said Brian Holdwick, VP of theDetroit Economic Growth Group.”One of the city’s initiatives is for the city to be alive 24-7,” Holdwicktold GlobeSt.com. “The way it’s been done in a lot of other cities is tobring in residents, hotel and entertainment to the downtown areas.”

Downtown, like the city itself, has suffered for decades. At its peak inthe years after the birth of the automobile industry, the city has dwindledsince the 1960s. Some reasons have included a separation of races, whitesleft in mass numbers after the race riots of the late ’60s.

Now, crime, poor city services and failing schools have left many abandonedhomes and businesses in Detroit.Former Mayor Dennis Archer launched a dream to revitalize the city in thelate 1990s, and current Mayor Kwame Kilpatrick is continuing that goal,Holdwick said. Businesses are helping, such as the massive move by GeneralMotors Corp. and Compuware to large headquarters in the downtown.Now, residential units must be built to entice people to move in, Holdwicksaid.

One of the main tools being used to build new residential complexes is gapfinancing, he said. Basically, the DEGC provides loans to developers tobuild condominium units in historic buildings.”Without some incentive, it’s just not financially feasible to build inthese buildings, the costs to renovate don’t match potential profits,”Holdwick said.

Instead, his public-private corporation hands over millions of dollars inloans to developers for new projects, though the DEGC will have to wait toget paid.”The owner has to be in the project five years to qualify for this,” he noted.

Thus, a historic building will first become high-class apartments or rentedlofts for five years. After that, the units can be sold as condominiums,and the owner will pay back the DEGC loans.”After five years, we’ll get our principle back, and maybe some more,”Holdwick said.

There are a handful of projects testing out this process, though none arenear the five-year mark. These include the Kales Building ($2.5 millionloan), Merchants Row ($4.7 million loan), Lofts of Woodward ($1.3 millionloan), Eureka Building ($500,000 loan) and Lafer Building ($450,000).

“I would say there’s been signs of success already,” Holdwick said. “Therents at the completed buildings are between $1.15 to $1.25 per square foot.That’s a lot higher than it was five years ago.”

Detroit is turning the corner, by proof of these construction starts,Holdwick said.”It’s proved by the deals getting done,” he said. “I believe there’s pent-updemand. You’re going to see Compuware and EDS [a GM supplier] employeeswanting to move in and live downtown. Once we get residential, everythingelse will follow.