Gilbert buys One Detroit Center; Ally moves in
Downtown development impresario Dan Gilbert has bought the landmark One Detroit Center building and renamed it Ally Detroit Center, in honor of its newest tenant: Ally Financial.
The deal is significant not only because it adds an occupied skyscraper — and the state's tallest office building at that — to Gilbert's portfolio of some 70 Detroit buildings, but because it also will keep Ally downtown. The finance company once known as GMAC had considered gathering up employees from several Metro Detroit sites, including the Renaissance Center, and moving to Southfield.
Gilbert, the billionaire founder of Quicken Loans, said the purchase of the building at 500 Woodward was finalized only minutes before it was announced at a press conference.
"We may have signed the lease before we owned the building," Gilbert joked.
Ally will move some 1,500 employees and contract workers into its new headquarters in spring 2016.
Bedrock Real Estate Services, Gilbert's property arm, would not say how much was paid for the building and its garage. However, Gilbert said the amount of money Ally and Bedrock will invest in the building, plus the rent that will be paid by Ally over the next nearly 13 years, will make it a more than $200 million deal.
Unlike most of Gilbert's acquisitions, the building was not distressed or cheap. He is not working with other partners in the purchase, nor receiving tax abatements or incentives.
The One Detroit Center will be the second-largest property in his portfolio, after the joint purchase of the 1.1 million-square-foot Compuware Corp. headquarters, which Bedrock co-owns with Meridian Health. One Detroit Center is the third largest office building in the city, behind the 996,000-square-foot Penobscot building at 645 Griswold, which is owned by Triple Properties Detroit LLC.
"Ally was pen and paper close to signing and going out of the city. We put out a full-court press," Gilbert said. "We had the space. They had a need. I think deep down they wanted to stay."
Victory for Detroit mayor
The addition of Ally as a tenant is a huge victory for Mayor Mike Duggan and the city.
The 45-story "Class A" building, which was once the headquarters of Comerica Inc., has been on the market since November. It's an easily recognizable part of the Detroit skyline with its neo-Gothic spire-topped tower. That puts it right along the path of Gilbert's numerous other properties on the lower Woodward corridor. It formerly was known as Comerica Tower at Detroit Center, but the name was changed when the financial institution relocated its headquarters to Dallas in 2007.
The building was listed as 75 percent occupied when it was put up for sale. The property's previous owner was New York-based iStarFinancial Inc., with the Detroit Police and Fire Retirement System having a 10 percent stake in it.
Gilbert says with the addition of Ally, the building will now be 100 percent occupied.
The property includes two adjacent parking structures, according to CoStar, a commercial real estate database. The One Detroit Center garage has seven stories above ground and two below and can hold up to 2,070 cars. The Two Detroit Center garage, already owned by Bedrock, has eight levels above ground and can hold up to 1,000 cars.
Jeffrey Brown, who became Ally's CEO on Feb. 22, said the One Detroit Center building wasn't on the company's radar when it was looking for a new headquarters. Bedrock and Duggan pursued it, he said.
"Many of our leases, including the ones in the suburbs, are coming due, which allowed us to explore our options," said Brown. "I wanted to find a space with my teammates where they could all feel the energy of the company itself being together and the energy of downtown."
Duggan said the city and Bedrock had two weeks to prepare a pitch for Ally's directors without even knowing if Gilbert's company would be able to finalize purchase of the building.
Building's largest tenant
Ally is agreeing to a 12-year, nine-month lease of 13 floors, or 321,000 square feet. The financial institution will become the largest tenant in the building, joining more than 20 others including PricewaterhouseCoopers and several law firms.
Jim Ketai, CEO and co-founder of Bedrock, said some of the tenants will be shuffled around to make room for the 1,300 full-time and 200 contract Ally employees who will transfer from other sites and move into their new headquarters..
One of the major sticking points was parking, because Ally could get free parking in the suburbs while it's a hot commodity in downtown Detroit.
Duggan said the Detroit Downtown Development Authority and Bedrock worked together to provide an incentive plan to provide 550 of the 1,550 necessary spaces for free.
"It was a key to bridging that gap," Brian Holdwick, executive vice president of real estate and financial services for the Detroit Economic Growth Corp, said Tuesday.
Ally's presence in the city should generate between $1.4 million and $1.8 million in annual income tax revenue for the city, officials said.
"There are enormous business opportunities with being located in the city of Detroit today," said Duggan. "Instead of losing 700 jobs, which is what it looked like we were going to have 60 days ago, we've got 1,500 people coming in with a new headquarters in Detroit."
Ally consolidates offices
Much like the city of Detroit, Ally Financial has experienced quite the comeback, too.
Ally, a mortgage and auto lending firm and online bank, is headquartered in the Renaissance Center Building. The company said in January it was considering consolidating its five locations in Metro Detroit to a single location. Ally has about 700 people working in Detroit, along with 300 at the Southfield Town Center and Galleria in addition to employees in Troy and Auburn Hills.
At one point, the government owned a 74 percent majority stake in Ally. In late 2008, the Federal Reserve agreed to grant Ally, then GMAC, bank-holding company status so it could qualify for loans under the Wall Street and auto rescue program. Ally got two additional bailouts totaling $17.2 billion, and Treasury tapped Ally to be the primary lender for both GM and Chrysler.
Since then, GM has acquired its own lending arm, GM Financial.
Rochelle Freeman, business development manager for the city of Southfield, said she did not have any conversations with Ally about moving the headquarters to her city. She said there have been major shifts for office tenants in and out of the city in the last year.
"We're happy they are staying in Michigan and in the Metro Detroit area," said Freeman. "We hope we can get the next big deal."