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Ilitches, Ross to build UM Detroit Center for Innovation on site west of Fox Theatre

Crain’s Detroit Business
Dec. 13, 2021
Kirk Pinho

A new University of Michigan graduate school building is expected to be built on a 4-acre surface parking lot west of the Fox Theatre in the Ilitch organization’s District Detroit development area.

After months of speculation and negotiations, billionaire real estate developer Stephen Ross, chairman of New York City-based Related Cos., and fellow billionaire Christopher Ilitch, president and CEO of Ilitch Holdings Inc., confirmed in a news conference that the Detroit Center for Innovation is now planned for the area instead of the former Wayne County Consolidated Jail site on 14 acres of Dan Gilbert-owned land at Gratiot Avenue and I-375.

The site is bounded by Cass and Grand River avenues and West Columbia and Elizabeth streets.

The development is estimated to cost $250 million to bring a new 200,000-square-foot research and education center to the site, which also includes the Loyal Order of the Moose Lodge building at 2115 Cass Ave., expected be turned into a technology incubator. A new-construction nearly 300-unit building would have housing along Cass Avenue, according to the release.

In addition, ServiceNow, a digital workflow company, is expected to expand its existing employee base in the area.

Mary Sheffield, Detroit City Council president pro tem, said during a Monday morning news conference that no city tax abatements or other financial incentives are involved in the development.

Lt. Gov. Garlin Gilchrist told Crain’s following the event that state incentives have not yet been discussed.

“We haven’t had conversations about that at this point,” he said.

The building would be developed by Related and then donated to the university, which would not pay taxes on the property.

Ross told Crain’s following the event that construction would begin late next year or in early 2023.

“We are now doing the drawings and moving through to be in a position to start,” he said.

Making it real

The Monday release also says Olympia and Related are “exploring additional development opportunities” within The District Detroit footprint, including things like affordable and market-rate housing, historic preservation and commercial space.

The investment could spark even more change for an area of downtown that has already seen plenty.

“The lack of density in that district is big right now,” said John Gibbs, co-founder of Detroit-based real estate company of Sturgeon Bay Partners LLC, who paid an undisclosed amount for the Park Avenue House building in the District Detroit area earlier this year.

“If anyone can take on a project of this scale, it’s Related and they’ve had success with similar projects such as Hudson Yards in other states. We strategically chose to invest in Midtown because of med and ed (DMC and Wayne State University), so if the University of Michigan project is successful, we’d be keen on many more projects in this immediate area. Detroit’s done a great job at attracting a couple well known technology companies. We are hopeful that the innovation center drives more big names in the years to come.”

The fact that Ross had been working with the Ilitches to build the Detroit Center for Innovation west of the Ilitch family’s Fox Theatre has been public knowledge since July, although both sides have been tight lipped about the negotiations.

He declined to tell Crain’s following the event who initiated discussions on putting the Detroit Center for Innovation in the District Detroit area.

Ross, one of UM’s most prominent donors, had been planning to build the satellite campus on the former so-called “fail jail” site on the eastern edge of downtown with fellow real estate billionaire Gilbert, who is founder and chairman of the Detroit-based Rocket Companies Inc. (NYSE: RKT) mortgage and financial services company.

However, a variety of factors led to Ross pulling the plug on building on that site and instead shifting his focus to The District Detroit area.

Ross, who in February 2020 announced that he was committing $100 million to the project, told Crain’s Monday that he couldn’t raise any additional money for it during the early days of the COVID-19 pandemic.

“People weren’t interested during the pandemic,” he said. “We had just started and then we hit the pandemic. It was almost like starting from scratch.”

Additional fundraising between $100 million and $200 million is still needed, he told Crain’s Monday.

Building District Detroit

Ross said additional development across a variety of asset classes are also envisioned, including residential, retail, office, and hotel.

Grand promises of large-scale development in the District Detroit area — largely controlled by the Ilitch family — aren’t new, however.

Seven and a half years ago, the Ilitches said they would develop the 45- to 50-block area in a short period of time with similar developments. That announcement was made at a time the city was just a few months away from emerging from of its historic municipal bankruptcy.

And while that’s where the Ilitches built Little Caesars Arena to anchor the district, it has been slow to deliver on a pledge for housing — although the first residents have recently moved into the first apartment development, the Eddystone, which was completed with the city threatening to take away the project .

In addition, much of the area envisioned as a vibrant series of mixed-use neighborhoods when it was announced in July 2014 remains surface parking.

In addition to the area, Olympia Development of Michigan developed the Wayne State University Mike Ilitch School of Business, a new Little Caesars headquarters, and a new office building. It has also been working on renovation of the Detroit Life Building as well as the Women’s City Club building, where the Monday announcement was held on the second floor.

Ross and Ilitch, now working together after a falling out with Gilbert’s Bedrock LLC real estate company, hope to change the perception of the area as a figurative development dead zone.

Some efforts have already begun.

Earlier this year, the city struck a deal for the sale for about an acre of land at the northeast corner of Charlotte and Third streets to an entity tied to Related and Detroit-based developer The Platform LLC for a project that, at the time, was to include 75 units of housing.

Ross is the developer behind Hudson Yards in New York City, the largest private real estate development in the U.S., and The Platform is run by Peter Cummings. Ross is the nephew of the late Detroit businessman Max Fisher, and Cummings is married to Fisher’s daughter, Julie Fisher Cummings.

Passing on the ‘fail jail’ site

Ross and Gilbert and their respective deputies had butted heads over fundamental development issues like building orientation, sight lines, site entrances, interconnectivity and accessibility, and other issues — and how all of those impacted the remaining 7 acres of Gilbert land, a source said earlier this year.

In October 2019, Gilbert’s Detroit-based Bedrock, Related, Wayne County, and the city announced plans for the Detroit Center for Innovation, which was planned to be a $750 million development anchored by a $300 million graduate school initiative for things like mobility, AI, sustainability, cybersecurity, financial technology and other fields.

Ross had been looking at possible alternative locations for the Detroit Center for Innovation at least since fall 2020, however, when he toured a building on the Detroit riverfront.

Since then, limited liability companies following the Ilitch family’s method of operation for purchasing property in secret have been buying sites west of the Fox Theatre, including the Film Exchange Building and Bookies Bar & Grille building.

Jay Lambrecht, owner of Bookies, said in a text message to Crain’s on Sunday that Bookie’s is to remain open for the time being under a newly signed lease with his new landlord that is “not long term.”

He said, prior to signing the lease, that he didn’t know if he would relocate from his building after the sale.

“We will celebrate our 20-year anniversary next year, which is a milestone I’m looking forward to,” Lambrecht said.

Land assembly had been seen as one of the challenges to building the Detroit Center for Innovation in the area, experts said, given the potpourri of ownership interests in the blocks to the west of the Fox.

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