Rising investment in city retail, office and residential developments will allow Olympia Development of Michigan to pay off early and refinance about $200 million in public bonds that helped construct Little Caesars Arena in downtown Detroit, officials said Wednesday.
The Series B 2014 bonds were issued by the Michigan Strategic Fund with a 30-year maturity to be retired through annual payments from the Ilitch organization. They were financed at a time when financial markets lacked confidence in Detroit, but the city’s surging redevelopment “has set the course for more favorable financing options,” representatives said in a statement.
“Five years ago, our city was in bankruptcy, and catalytic investment was difficult to come by,” said Glen W. Long Jr., CFO and interim president/CEO, Detroit Economic Growth Corp.
“With the payoff of the Series B bonds, in addition to having a vibrant Little Caesars Arena and thriving District Detroit, our city experiences a major win. Eliminating the bond debt gives the (Downtown Development Authority) an opportunity to drive even greater economic development in Detroit.”
The $862.9 million Little Caesars Arena, a sports-and-entertainment complex housing the Red Wings and Pistons, was built with a mix of private and taxpayer funding.
Private financing accounts for about 62 percent, or nearly $539 million of the project. The remainder — $324 million overall — is government financed.
The facility was primarily funded through the Ilitch family of the Little Caesars pizza chain and included taxpayer-backed construction bonds. Public records show the Ilitch family has spent nearly $50 million purchasing properties from dozens of private owners over 15 years to acquire what it needed for the arena. They spent millions more on dozens of properties in the District Detroit, a 50-block entertainment district designed to surround the arena complex.
The Detroit Downtown Development Authority used $284.5 million in school property taxes captured from within its downtown district to support part of the bonds.
In May, the strategic fund board approved the DDA’s request to issue up to another $36 million in tax-exempt increment revenue bonds to fund construction improvements and related costs to account for the basketball team. It also set a ceiling of $310 million for the issuance of bonds, saying the DDA will need more prior to Jan. 1, 2019, to refinance outstanding debt.
The Ilitch family, which owns the Red Wings and Olympia Development, intends to privately finance the rest of the project.
The refinancing represents another major step forward, officials said Wednesday.
“Detroit’s well-documented comeback is being recognized by third-party financial entities, which will drive even more investment in the city, region and state,” said Christopher Ilitch, president and CEO of Ilitch Holdings, Inc., in a statement. “For our organization, savings realized from the retirement and private refinancing of these bonds at a lower rate will contribute to our expanding vision for The District Detroit.”