Local developer eyes Joe Louis Arena, city says
Detroit — The former Joe Louis Arena site soon could be in the hands of a local developer, according to the city.
The city is working on a $14 million deal with a Detroit-based real estate company interested in developing the site. The city administration outlined Thursday a proposed sale that would move control of the property from bond insurer Financial Guaranty Insurance Co. to Sterling Group.
As part of the deal, Sterling Group would buy FGIC’s interest in the arena site and the adjacent parking garage.
“We negotiated the hell out of this deal,” said Matthew Walters, the city’s deputy group executive for jobs and the economy, during the Detroit City Council’s Planning and Economic Committee meeting Thursday. “The administration — not the CFO, not the law department — the administration negotiated this deal, and yes, this is the best deal we could get.”
Walters estimates that the city will save $2.7 Million on rehabilitation work for the garage and a minimum of $4 million it would have had to pay for environmental remediation following the arena demolition as the city will be released from all environmental obligations. At closing, the city will also receive $2 million for the garage.
Sterling Group would be responsible for paying back the $10 million loan that the Michigan Economic Development Corp.’s Michigan Strategic Fund board approved for demolition in December. The repayments would equal $12.1 million over the 20-year life of the loan. The city also would receive reimbursement on the first $7 million of Sterling Group's future brownfield tax increment financing.
As part of the agreement, Sterling Group would have to break ground and apply for brownfield tax increment financing on the development within five years of closing, or pay an additional $1 million to the city.
The issue will return before the Planning and Economic Committee in one week.
The vacant Joe Louis Arena is being dismantled; plans for the site are unknown. The venue, the longtime home of the Detroit Red Wings, opened in 1979 and had its last concert in 2017.
Elie Torgow, chief executive officer of Sterling Group, did not address the panel during the meeting and declined to comment on potential uses for the site.
The arena site and parking garage were part of Detroit's exit out of Chapter 9 municipal bankruptcy in 2014. The city agreed to give the properties to FGIC, a major creditor in the city's bankruptcy, as part of the settlement deal. The city was responsible for tearing down the arena and FGIC needed to find a development partner for the site.
Earlier this year, the New York-based FGIC, which gained the property as compensation for losing $1.1 billion in the bankruptcy, said it no longer wanted the sites.
There were legal battles and delays between FGIC and the city, with the city falling short of its original deadline to begin demolition of the arena. Numerous extensions to submit a development proposal were requested.
Detroit Councilman Gabe Leland said the city gave FGIC ample time.
“I want to let this process move forward so we can get something going in terms of the real estate on the riverfront,” Leland said.
The FGIC was granted a deadline extension for a development plan until January 2019. However, in July, FGIC's request for another extension was denied, Walters said.
“FGIC started to think about other options because they knew they were not going to meet these timelines. They did not have a development partner or the wherewithal to produce anything on this site,” Walters said.
The new development plan deadline is June 15, 2020, according to the city. The city has until June 15 to complete demolition of the arena.