Council approves land deal to reinvent Herman Kiefer

Christine Ferretti
The Detroit News

Detroit — The City Council on Tuesday approved a land deal that clears the way for a development plan to reinvent the vacant Herman Kiefer Hospital complex and a blighted southeast Detroit neighborhood.

Under the deal, New York-based developer Ron Castellano will acquire the 18-acre site for $925,000 with guarantees that he will secure, maintain and weatherproof all of the vacant buildings and maintain blighted open space.

Castellano bid on the project last spring and has spent nearly 19 months working with city administration on the terms of an eight-year development agreement, an effort that could exceed $75 million.

The complex is composed of 10 buildings, including three former schools and the 424,000-square-foot main hospital that’s been empty since October 2013.

Specifics aren’t yet determined, but Castellano says there’s potential for a mix of housing, retail and office space.

Maurice Cox, Detroit’s director of planning and development, said Tuesday that he fully supports the ambitious plan to bring back the buildings and housing stock and is “humbled by the challenge.”

“This is the largest historic preservation project to happen in Detroit outside of the downtown corridor,” Cox told council members. “This is challenging work. There are not many comparable projects of this type in the United States. This is not going to be an easy lift, but the results will be extraordinary.”

Through the agreement, Castellano’s Herman Kiefer Development LLC and the city will partner to save, rehabilitate and creatively reuse the seven medical complex buildings; the former Hutchins and Crosman school buildings; JTPA Nursing school; and about 100 vacant land bank homes in the Virginia Park neighborhood.

Tuesday’s approval gives the city authorization to enter into the development agreement.

Councilwoman Janee Ayers was the lone member to vote against the land deal. Ayers says she’s pro-development, but uncomfortable with the sale price and the lack of specific plans. Ayers and President Brenda Jones also voted against an associated resolution that gave the developer control of the vacant homes.

“None of this was concrete enough for my liking,” Ayers said. “I’m really glad that they want to come here. I just want anybody that’s coming, to come with a real plan and to also come with what we’re worth.”

Castellano on Tuesday reiterated that he believes the area holds a lot of potential. The first year will include in-depth master planning and hopefully some outdoor markets and fairs, he added. When it’s complete, the now desolate area will be lively again, he says.

“The neighborhood will be vibrant,” he said. “The whole thing will really come together.”

The deal outlines required annual investments toward rehabilitation and development. The development team must spend a minimum of $1 million annually for the first five years, and at least $2 million per year in years 6-8.

In addition, by the fifth year — or first deadline — the development team must either ensure that at least 35 percent of the site is in use or have contributed at least $20 million toward the project. By the final deadline in year eight, at least 80 percent of the site must be active or the development group must have achieved an investment of at least $75 million.

Councilwoman Mary Sheffield, who represents District 5, called for the establishment of a community advisory group to weigh in on plans for the site. She also pushed for terms that will ensure at least 20 percent of the vacant homes will be rehabilitated by a community association.

The city’s Planning Commission and council previously signed off on a master plan and zoning changes to permit mixed-use development on the site.

The first phase, officials said, features improvements for the streets surrounding the defunct medical complex, including stewardship of empty lots and board-ups of vacant homes in the area bounded by the Lodge Freeway to the east, Clairmount to the north, Virginia Park to the south and Rosa Parks Boulevard to the west.

Within 90 days of the land sale closing, the development firm must secure the vacant houses and associated lots. The developer will have a one-year option to purchase the vacant homes if they commit to rehabilitating them within 18 months.

Detroit has spent about $500,000 annually for security at the main hospital building, and at least $100,000 more for maintenance and utilities.