United Artists building developer gets tax break on $56M project

Detroit — A development group with plans to renovate the United Artists building is another step closer after the Detroit City Council on Tuesday approved a tax break for the development.

In a 9-0 vote, the council approved establishing an obsolete property rehabilitation district for the property at 150 Bagley. The rehabilitation district is valued at $175,305, according to the city.

Bagley Development Group LLC is planning a $56 million project to redevelop the United Artists building into 148 apartments, with 20% as affordable. The development is called Residences @ 150 Bagley.

“The team is very excited and very anxious to bring a development downtown by Detroiters,” said John Graves, spokesman for the development group, following the vote. “That’s the first step, and it’s been a long journey because it’s taken a couple years to get here, but it’s all good.”

The group is also seeking approval of a neighborhood enterprise zone valued at $2,251,310, according to the city. That request will return to the City Council’s planning and economic development committee on Nov. 21.

Graves said they expect to close on financing for the project by the end of the year.

The long-vacant 18-story historic building near Grand Circus Park includes office space and a theater. Bagley Development Group LLC has a 70-year lease with the building owners, the Ilitch family, according to the developers.

Construction is expected to begin in the first quarter of 2020 and be completed in mid-2021. Part of the plan includes demolishing the theater, which the group says is needed to secure financing for the project.

The approval of the tax break came after City Councilman James Tate on Tuesday asked the developers to address previous statements Emmett Moten, a partner in the development group, made during a public meeting last week that the Department of Housing and Urban Development required the theater be demolished. The Detroit News first reported Monday that the federal agency said that wasn’t the case.

According to a lender letter provided by the development group, it was the mortgage company financing the renovation of the building, St. Louis-based Gershman Mortgage, that said retaining the theater would put the financing at risk.

Moten apologized before the council Tuesday, saying that he misspoke during the meeting.

“I said HUD, and I should have said Gershman, but it’s the lender with HUD, and HUD’s the insurer,” Moten said. “I misspoke myself, and I apologize if I sent you in the wrong direction.”

In an Oct. 2 commitment letter to the development group, Gershman Mortgage said changing plans to refurbish the theater would put the project's financing at risk. It also had concerns that keeping the theater — even if renovated — would make it difficult to lease the residential units.

The State Historic Preservation Office also supports demolition of the theater saying that the historic integrity was lost because more than 90% percent of the historic interior fabric is gone.

In addition to residential, 10% of the project will be retail and restaurants. Graves expects the project will create more than 100 jobs.

“There so much going on downtown so this is just in addition to the growth that we already have downtown,” Graves said. “I think this will be very unique in that it will be managed by Detroiters. There are nine members of the group, eight of whom are African American. It just will be a sense of pride, this particular development because there aren’t any others downtown of this magnitude with the type of diversity and Detroit roots.”

The United Artists building was last occupied in the early 1980s, according to HistoricDetroit.org. It went through numerous owners, including one who sold its fixtures in 1975. Olympia Development of Michigan bought the building in 1997.

cwilliams@detroitnews.com

Twitter: @CWilliams_DN