The new Detroit Red Wings hockey arena under construction has attracted a surge of outside investment interest, with developers vying to build a new hotel, housing and stores that could fulfill the promise of an expanded district of sports and entertainment rising on the northern edge of downtown.
Seven hotel developers have indicated an interest in building the planned hotel. And at least 10 qualified residential developers are expected to bid on building housing in the district, officials of the Ilitch family's Olympia Development told the Free Press last week.
The whole investment could eclipse $1 billion in public and private dollars. When the arena opens for the Detroit Red Wings season in late 2017, some 210,000 square feet of office and retail space will arrive at the same time, and the first 225 units of residential housing in adjacent projects will come on line a few months after, the Ilitches predict.
“Our ongoing conversations with retailers, prospective office tenants and residential developers have been extremely positive,” said Steve Marquardt, vice president of Olympia Development. “The District Detroit is coming to life and bringing opportunity and investment to our city.”
Included in that residential housing: a remake of the historic and long-abandoned Eddystone Hotel north of the arena, which is expected to be turned into 100 rental units. The Ilitches have committed to making about 20% of those units affordable for lower-income residents.
Further out, more housing, office, and retail spaces, along with a 350- to 400-room hotel, are on tap for the district, located between Woodward and Cass north of I-75. Olympia anticipates 800 to 1,000 new housing units in the arena district by 2020.
Of the estimated $1.2 billion in total spending for the new district, Ilitch officials broke it down this way: The arena itself is now estimated to cost $627.5 million; the adjacent office, retail and restaurant space will cost $196 million, and the nearby housing, hotel, Little Caesars headquarters and public infrastructure will cost in the $400-million range.
When the city’s deal with the Ilitches was announced in late 2013, initial estimates had the arena itself costing $450 million with the Olympia organization promoting another $200 million in private investment in the district at large. The arena's cost rose with premium additions including more visual displays, an outdoor plaza and new so-called gondola seating to get some fans closer to the action.
The extras and any other overages in the cost of the arena will be covered by the Ilitch family as part of its private investment.
The new estimates mean that at least twice as much private investment is estimated to take place in the district beyond the arena, which is partly paid for with $250 million in state-issued bonds and $35 million in downtown property tax revenue already collected and earmarked for economic development. The state also issued another $200 million in bonds for the arena that the Ilitches are responsible for paying back.
The rest of the hockey arena and the district investment comes mostly from private sources, including the Ilitch family and future private developers.
The arena project is part of a special downtown district that sets aside property taxes for future downtown developments. The public's $250 million in arena bonds will be paid off using those property tax receipts, which are expected to rise with the addition of new businesses and housing that result from the arena project. The downtown property tax "capture" held by the Downtown Development Authority has been used in recent decades to advance many downtown projects such as the renovation of the Book Cadillac Hotel.
In interviews with the Free Press late last week, Marquardt and Tom Wilson, president and CEO of the Ilitches’ Olympia Entertainment, outlined several other developments:
- A public plaza planned for immediately outside the arena’s western edge could host 100 to 150 events a year, they said. The district itself could host 1,000 events a year including not only major sports and concert events in the arena but corporate meetings, weddings, amateur hockey games, and other events throughout the district, including in what the Ilitches call the Via, a glass-enclosed indoor street at the perimeter of the facility.
- Plans for a new headquarters for the Ilitches’ Little Caesars pizza company, first announced in December 2014, have been expanded to include an extra story to accommodate the business' growth. The 240,000-square-foot building, now planned for nine stories, should break ground early this year.
- All of the arena’s 52 luxury suites were leased out within six weeks of being offered, generally on seven- to 10-year leases going for about $300,000 per year per suite.
"When this is done, with the stadiums, the Fox Theatre, the other theaters down here, this is all going to be the epicenter of sports and entertainment in Michigan. So it's going to be a pretty exciting place to be," Wilson said.
