May 22, 2018 (DETROIT) ─ Today the Michigan Strategic Fund (MSF) provided the final approval for Bedrock’s use of the MIthrive financing tool, clearing the final hurdle that locks in $2.15 billion in new investment in Downtown Detroit for four transformational projects:
As a result of its support for these four transformational projects through the MIthrive program, which is projected to total $618 million in foregone tax revenue over approximately 30 years, the State of Michigan is expected to realize $2.5 billion in new tax revenue over the same period. On a present value basis, for every $1 of support to make the projects possible, the state is expected to receive $3.2 in new tax revenue in return. This does not include the significant non-tax direct economic benefits and substantial job creation that is consistent with multi-billion dollar investments such as these.
“These landmark developments are a milestone representing Detroit’s credible new era of hope, optimism and growth,” said Dan Gilbert, Bedrock Founder and Chairman. “This process has been an outstanding example of collaboration between multiple levels of government and private industry that will unleash billions of dollars of investment, resulting in transformational impact to Detroit, the region, and the entire state of Michigan. Governor Snyder and the Michigan Strategic Fund were instrumental in getting these monumental projects to the finish line. I want to thank the Governor, MSF, and all of our local and state partners for their strong support and commitment to Detroit and the state’s transformation.”
Together, Bedrock’s four projects will support an estimated 22,000 new jobs – 15,000 jobs related to the construction of the projects, and over 7,000 new permanent, high-wage jobs occupying the office, retail, hotel, event and exhibition spaces. Construction has already started on the Hudson’s site and Book Tower, and the Monroe project and the One Campus Martius will be underway later this year.
The Hudson’s Site and Monroe project will be the first 20-story or higher commercial towers built in downtown Detroit in more than a quarter-century and are defined by our commitment to public, exhibition and meeting spaces, as well as iconic design that honors and evolves Detroit’s architectural legacy.
Bedrock’s Transformational Brownfield Plan
MIthrive builds on the existing Brownfield Tax Increment Financing (TIF) program by providing state support needed to make transformational development projects financially feasible. MIthrive works by deploying the strategy of utilizing a portion of new state tax revenue to help bridge the gap between today’s development and construction costs and market rents. This mechanism is known as tax increment financing or “TIF,” and individual projects are approved through what is known as a “Transformational Brownfield Plan.”
Importantly, the TIF will not capture any City of Detroit taxes, and it will have no impact on the Detroit Public Schools Community District.
“The Michigan Strategic Fund’s approval of the MIThrive financing represents a major step forward for Detroit and other Michigan cities that are rebuilding,” said Mayor Mike Duggan. “Thanks to this new tool, we will be able to make sure these projects realize their full potential to create thousands of new jobs in our cities.”
“MiThrive poses an incredible opportunity for carpenters and skilled tradesmen across the state,” said Mike Jackson, Executive Secretary-Treasurer, Michigan Regional Council of Carpenters. “Bedrock’s four projects represent thousands of jobs for our union members, as well as tremendous opportunities for young people looking for a rewarding career in the trades.”
In September 2017, Bedrock announced that it would be seeking gap financing to make these transformational investments possible through the new state MIthrive program. In November 2017, the Detroit City Council approved the MIthrive financing package for Bedrock’s transformational projects, setting up the final state review and approval.
The State Review Process
As part of the months long approval process, the Michigan Strategic Fund worked with outside third-party consultants to analyze whether approving the TIF would be cost beneficial for the State of Michigan and whether the TIF financing is needed for the projects to be financially possible.
Based on a report from University of Michigan economists, the MSF concluded that this Transformational Brownfield Plan will deliver a net tax revenue increase of $1.882 billion ($596 million present value), or more than 3 to 1 return of the tax incremental investment being made by the State.
In addition, the review confirmed that the TIF financing is needed to make the projects financially viable, helping bridge the gap between today’s development and construction costs and market rents. The MIthrive law also mandates a reduction of the incentives under certain conditions, if upon the projects’ completion it is determined that the construction and development costs are lower than projected.
Bedrock’s Commitment to Community
Bedrock is committed to maximizing opportunities for Detroit residents and businesses and will be complying with the City of Detroit’s executive orders with respect to utilizing Detroit residents and Detroit-based businesses in the construction of the four projects.
In addition, Bedrock is proud to have invested in the Randolph School and the Breithaupt Career and Technical Center, both part of the Detroit Public Schools Community District, to help train and prepare Detroit students and adults for jobs that will be created through these transformational projects.
Bedrock has also entered into an Affordable Housing Agreement with the City, committing that 20 percent of its overall residential rental portfolio will be developed or preserved as affordable housing.
Detroit-based Bedrock is a full-service real estate firm specializing in acquiring, developing, leasing, financing, and managing commercial and residential buildings. Since its founding in 2011, Bedrock and its affiliates have invested and committed more than $5.6 billion to acquiring and developing more than 100 properties, including new construction of ground up developments in downtown Detroit and Cleveland totaling more than 18 million square feet. Bedrock’s real estate portfolio consists of more than 330 office and retail tenants in Detroit’s technology-centric downtown. For more information, visit bedrockdetroit.com or engage with us on Twitter @BedrockDetroit and Facebook