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The project to build Chemical Financial Corp.'s new headquarters in downtown Detroit will receive government incentives after all.

The governing body of the Michigan Economic Development Corp. approved Tuesday nearly $17 million in reimbursements to site developer and owner Sterling Group affiliate GPC Adams LLC through the tax capture of eligible activities over 30 years starting in 2022. The City Council also approved $12.7 million in property tax abatements Tuesday for the project over the next 10 years.

The incentives will go toward the creation of a $105 million 20-story, mixed-use building at Woodward and West Elizabeth near Comerica Park. Chemical Bank, which has moved its headquarters from Midland to Detroit, will be a long-term tenant.

The tower is expected to bring 500 workers to downtown. It also helps keep Chemical's headquarters here if its merger with Minnesota-based TCF Financial Corp. receives regulatory approval later this year, counter to a trend in recent decades of banks leaving the city. The combined TCF Bank would be one of the top 50 largest banks in the United States and hold $45 billion in assets.

Tom Shafer, Chemical Bank president and CEO, said in July when the bank announced its move to Detroit that it would not seek incentives or abatements from the city.

“We’ve asked for no incentives for the move to Detroit," Shafer said at the time. "We don’t expect any, and we’re doing this because we think that there’s greater opportunity for growth in the marketplace to support what we believe is a great economic comeback story in our state."

Chemical Bank later clarified that no abatements were being requested to move its employees downtown, not to build its new headquarters, Wennerberg said.

"(Shafer) cleaned up that quote afterward," he said. "He meant the bank would not request incentives directly from the city to move the employees downtown. The headquarters is going to have its own incentives."

Chemical Bank also is not the entity seeking the incentives, but the developer is. Gary Torgow, Chemical Financial Corp.'s chairman, however, is the founder of Sterling Group. He has not been active with the firm since 2009, said Tom Wennerberg, Chemical Bank's chief marketing officer, though Torgow's children own it. Gary Torgow's son, Elie Torgow, is its CEO and the managing partner of GPC Adams LLC.

Sterling Group did not immediately respond for comment.

Although the original plan was for Chemical to own its new headquarters, that later changed, Wennerberg said.

"Chemical Bank is not a real estate developer," he said. "While we were looking at that initially, we also were looking at creative ways or opportunities to get us downtown that wouldn't require us to own the land and develop it."

The ownership distinction is an important one, said Erik Gordon, a professor at the University of Michigan's Ross Business School, because it matters for what the city will get from the deal.

"Is the deal what they Intended? What did they think they were buying — a new building for Detroit or a new headquarters?" Gordon said. "If the intention is to move the bank's headquarters to the city and bring lots of jobs here and it turns out the money is going to a developer, that's a shift. These aren't the same things."

The work plan approved by the state helps with construction. There are no associated job or tenant requirements, said Otie McKinley, media and communications manager for the economic development corporation.

"A project such as this will help revitalize downtown, increase foot traffic and bring multiple tenants to a vacant building and surface lot along the Woodward corridor," he said in an email.

More than $16 million of the nearly $17 million in expected reimbursements is from state school taxes. It includes more than $621,000 in local tax captures, as well. Detroit City Council approved these incentives earlier this month.

Available local and state school capture for the project actually total nearly $34 million. The project, however, is limited to a maximum reimbursement of $16,698,029 based on the project's scope, said Greg Tedder, chief community development and marketing officer for the state economic development corporation. The developer is requesting an additional $5,000 in tax increment financing from the Michigan Department of Environment, Great Lakes & Energy.

Despite the abatements and reimbursements, the City of Detroit still estimates the new headquarters will create a net benefit of nearly $10 million to the city and another nearly $5 million to Wayne County, Detroit Public Schools and other taxing organizations.

The incentives and estimated value of the project make the site eligible for the city's Community Benefits Ordinance, the Legislative Policy Division noted last week. Most projects that qualify voluntarily opt into the program, but GPC Adams has not done so nor has it received a waiver. The City Council may address this topic today, as well, said Derrick Headd, fiscal analyst for the council.

Chemical's new headquarters will create 200 new jobs and bring another 300 workers to downtown Detroit. The state's incentives will help demolish the vacant 10-story building currently on the lot for the construction of a 420,000-square-foot building near Grand Circus Park. The tax captures also will support asbestos removal, infrastructure improvements and site preparations.

The tower will include 7,500 square feet of ground-level commercial space, 185,000 square feet of office space across nine stories and ten stories of 311 parking spaces. There also will be a rooftop terrace. Chemical Bank will occupy at least six of the office floors, and the remainder will be available to other tenants or for expansion. Construction is set to begin this summer.

The agreement between Chemical Bank and the economic development corporation does not mention the inclusion of luxury condominiums. That is another difference from the bank's announcement last July, which did include housing.

For now, Chemical has office space at 333 W. Fort and has been transferring workers to Detroit. The bank also plans to retain its Midland workforce of more than 500 and its presence in that community as it expands into Detroit. Midland will continue to be the home of the bank's corporate operations center.

Battery plant

Akasol GmbH, a German producer of rechargeable lithium-ion battery systems for European automakers, also said Tuesday it will build a $40 million plant in Hazel Park and create 224 jobs.

"These projects are a testament of our manufacturing strength as a technology and mobility hub," Jeff Mason, CEO of the Michigan Economic Development Corp., said on a call Tuesday. "They will help us to build vibrant and diverse places for people to live, work and play."

The manufacturer is expanding its facilities in Germany but must open a production facility in North America to support on- and off-highway vehicle markets for its European customers here, according to a memo from the economic development corporation. 

Roy Schulde, president of Akasol's U.S. subsidiary Akasol Inc., said the move will bring Detroit one step closer to transforming into the "Electric Motor City."

"We can’t think of a better, more historic place for our first production plant in North America," he said in a statement. "Batteries are the future of both transportation and manufacturing and we look forward to attracting world-class talent from the local region to develop, test and produce our high-performance lithium-ion systems and bring them to the market for our customers.”

The Michigan Strategic Fund board approved a $2.24 million grant to compete with LaGrange, Georgia, which has a cost advantage of approximately $3.2 million compared to Michigan, according to the memo. The city of Hazel Park also has provided staff time and resources and job fair assistance.

KLA expansion

The fund's board also increased its grant to KLA Corp. by $1 million to $2.5 million after the California-based semiconductor equipment manufacturer approached the economic development corporation with a larger expansion opportunity.

"We have been excited to see the engagement in the community, so we have decided to increase the investment and make Ann Arbor our official second headquarters," John McLaughlin, KLA Ann Arbor site lead, said in a statement.

The board approved the original deal in October to build a new research and development facility in Ann Arbor Township. Under the amendment, KLA will invest an additional $80 million into its facility and add an additional 100 new jobs. That brings its total investment to $150 million and job creation to 600 positions in Michigan.

"KLA is interested in expanding further, recognizing Michigan has the highly skilled talent and affordable cost of living it needs to compete," the MEDC's Mason said, "proving our state’s business climate remains strong."

bnoble@detroitnews.com

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