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The challenge facing Detroit as it prepares to emerge from bankruptcy is whether the nascent development boom downtown will spread to other struggling areas.

In a 7.2-square-mile swath of Detroit — essentially downtown, Corktown, Midtown, the riverfront and Lafayette Park — investment is red-hot. There are almost weekly announcements of an upscale restaurant opening, or the purchase and renovation of a once-empty building in the city's core.

On Friday, national real estate investment firm Marcus Millichap noted favorable media coverage of "Detroit's 'comeback' " is attracting investors to the Motor City. "The revitalization of downtown Detroit is generating demand for apartments in the city," the firm said in a report, with high demand generating apartment conversions in downtown and Midtown.

"The bankruptcy has only made Detroit a more attractive investment," said Sandy Baruah, president and CEO of the Detroit Regional Chamber. "So many international investors view the bankruptcy, the emergency manager, the election of Mayor (Mike) Duggan as signs that Detroit is really tackling its most difficult issues.

"That's why you have seen a downtown that continues to get stronger," he said. "Bankruptcy isn't a dirty word in business any longer. It often means good investments at a great price."

But the challenge of a post-bankruptcy Detroit is to extend the excitement to a much broader section of the 138 square miles of the city. It's estimated 40 square miles of Detroit is now empty space.

"There is definitely the perception that the shiny, improving parts of Detroit are not intended for longtime residents," said the Rev. Darryl Gaddy, pastor of Victory Fellowship on the city's east side.

"You read about these enormous projects downtown with tax incentives, and they seem to sail through the entire bureaucratic process," he said. "Here, people are losing their homes because they are behind on their taxes. It's still a challenge to get the city to come out and board up the vacant homes."

The gap between the rebounding Detroit and the dystopian Detroit was on display in the days leading up to closing arguments in the city's bankruptcy case:

■Fashion designer John Varvatos announced on national television he is opening a boutique on downtown Woodward, a store that will sell $1,890 pea coats and $200 shirts.

■A United Nations panel held a session in Detroit and proclaimed the water shut-offs to residents behind on their bills a violation of basic human rights.

■Investment guru Warren Buffet told a conference room full of elite Motor City expatriates he's looking to bankroll a Detroit business.

■The Wayne County treasurer served tax foreclosure notices on a record 62,000 Detroit properties.

But the upswing downtown and in adjacent neighborhoods has received most of the attention.

Foundations and other institutions finance incentives to lure residents to Midtown and downtown. Nine of 10 rental units in the 7.2-square-mile area are occupied, according to studies. Rents have been going through the roof, in some cases increasing $3,000 in one year for the same place.

One big sign that declaring bankruptcy is helping sell Detroit is the number of out-of-state interests banking on the city, said Eric Larson, CEO of the Downtown Detroit Partnership.

"That has always been one of the challenges to go beyond local partners, and now the interest has never been higher," Larson said.

More than two dozen development projects are going on right now or have been recently completed downtown, according to the Downtown Detroit Partnership. One is the $650 million plan to transform 45 blocks into an upscale, densely populated area that's anchored by a new arena for the Detroit Red Wings. Construction of the arena is getting plenty of taxpayer help.

Foundations, too, often play a big role in financing the steady stream of developments. In Midtown, the influential nonprofit Midtown Inc. frequently finds a way to help finance the small retailers flocking to the area. Another major player is the Detroit Economic Growth Corp., the quasi-public agency that promotes development and often shepherds major downtown projects.

Many residents say the post-bankrupt Detroit needs to recognize how far some neighborhoods have fallen since the national housing crash five years ago. It accelerated the number of abandoned homes in the city, which has led to more arsons.

This past summer, nine homes were destroyed on one street within a 24-hour stretch. Residents of that street, Garland, say at least 21 homes have been set ablaze in the past year.

"People burn stuff up all the time now. It's the scrappers; it's the drug dealers who got beefs with each other," said Mark Johnson, an eight-year resident of Garland.

"What people like me need to see from the city and the bankruptcy is things are actually going to be better for everyone," said John Kiner, a 10-year resident of Garland.

City leaders say a post-bankrupt Detroit will shed the barriers so investment can accelerate citywide.

Other areas of the city are attracting investment and building momentum beyond the celebrated greater downtown.

Southwest Detroit hums with immigrant energy and a longstanding Mexican-American community. There are promising retail developments in areas such as "The Villages" on the east side, the Livernois Corridor near Marygrove College and the University of Detroit Mercy, and the opening more than a year ago of a Meijer on Eight Mile.

Still, Duggan gave a tough assessment of Detroit's chances to become a fully functioning city as the last witness called by Detroit's attorneys before the city rested its case in U.S. Bankruptcy Court.

"We're about 10 percent where we need to be," Duggan said. "It's going to be a multiyear process."

"I support this plan and I believe it is feasible," he told Judge Steven Rhodes, but he warned the city's fate could be affected by events outside its control. "I can't predict a national recession. I can't predict state revenue-sharing cuts. I can't predict different casinos being approved."

laguilar@detriotnews.com

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