First-time developers in Detroit don’t always have it easy. How do you secure financing? How do you keep expenses in line as the cost of construction skyrockets? Can rental revenue give you enough cash flow to pay off your loan and keep up with maintenance?
Adam Noel and Tom Anderton didn’t have much real estate experience but now own seven multi-family buildings near Boston Edison they bought and renovated in just seven years. We find out how they were able to do it while keeping costs in line.
There’s also lots of movement in Midtown including gentrification, parking zones and demolitions.
As always, thanks for reading.
>>Priced out: Older adults and low-income renters in and around downtown say they’re being gentrified out of these centrally located neighborhoods and forced to move to less safe parts of the city. Management at the Himelhoch Apartments, one of the few left for older adults downtown, told many residents last year they would have to leave because half the building was being converted to market-rate apartments. They’d have the option to move to an under-construction building in Brush Park, but many had gotten used to the great location downtown near transit stops. The Duggan administration has been scrambling to create more affordable options for renters, especially older ones where options are limited and waiting lists are long. (Metro Times)
>>Zone defense: A neighborhood in Midtown became the first to participate in the residential parking permit program giving residents in those areas the ability to park for free anytime and exclusive parking rights after 5 p.m. City Council approved the zone near Cass Park earlier in the month after an ordinance passed in 2019 made these kinds of zones possible. Permit applicants pay a $35 one-time administrative fee and $60 each year, with low-income residents and seniors getting a $30 discount. The council will soon vote on whether to approve two other Midtown neighborhoods for the program. Hearings for two zones in Brush Park are expected in the near future. (BridgeDetroit)
>>Calling the shots: We wrote last week about how the low demand for office space in Detroit is likely to remain for a long time as white-collar workers have more flexibility about where they work. Some smaller companies are taking advantage of the situation, securing better rental rates and amenities from landlords desperate for commercial tenants. One owner of a law firm that recently expanded its office space told the Detroit News, “There’s more inventory, a lot more inventory. Better pricing. You have room to negotiate.” (Outlier Media, Detroit News)
>>Throwing out the junk: We hear constantly from people in search of rentals about burdensome application fees. The White House is trying to address this problem by taking on what it calls “junk fees,” or fees “added onto rents to cover services that renters assume are included—or that they don’t even want.” These include things like application fees and convenience fees for paying rent online, or even trash collection. The Biden administration got commitments from several prominent rental platforms that they will begin to provide consumers with upfront cost information for each rental. (White House, Urban Institute)
Meet the Developers
Rehabbing historic buildings near Boston Edison
Adam Noel and Tom Anderton have renovated seven multi-family buildings that are now fully occupied. They managed to keep construction costs down and rents at or below market-rate while they increased in the rest of the city.
How did they do it? A commitment to place and a bit of luck.
Ilitches strike again
A building on Cass Avenue in Detroit’s former Chinatown neighborhood is likely going to be demolished — though City Councilmember Gabriela Santiago-Romero is hoping to save it.
The Ilitch family bought 3143 Cass Ave., which sits at an intersection with Peterboro Street, in 2004. It has been severely neglected since: The upper windows aren’t boarded up, and the roof is partially collapsed. The city marked the building for demolition way back in 2018, but more recently declared it a hazard and issued a demolition citation.
Santiago-Romero began weighing in last week, asking the city and Ilitches why plans weren’t made to preserve it earlier and if it can be saved now. She told the Detroit News: “I really want to hear from the city and the Ilitches what the conversation was about the property. Was there any conversation about saving it, ever?”
The councilmember is seeking an interim historic designation to delay demolition of the building, which was built in 1883 and once housed the Chinese Merchants Association. It served as a community center for Chinese Detroiters after they were displaced from the original Chinatown neighborhood near downtown. The building sits just south of the former Chung’s restaurant, which a developer plans on spending more than $3 million to redevelop.
This is one of a number of buildings the Ilitches have let deteriorate and then asked to demolish in the Cass Corridor. Some have argued this planned obsolescence was part of a long-term strategy to construct surface parking lots on the sites of these demolished buildings to service Little Caesars Arena. A former bar owned by the Ilitches caught fire and was demolished in 2019. The billionaire family only agreed to redevelop the former Hotel Eddystone building and a pair of Henry Street apartment buildings after arm twisting from the city and preservationists.
A vacant, historic school building near 8 Mile Road and Wyoming Avenue might be redeveloped into apartments. Urge Development Group got a rezoning approval from the Detroit Planning Commission to convert the William E. Higginbotham School into 40 apartments last week. The developer is also planning to build a pair of buildings across the street with another 60 apartments. The project is expected to cost between $20 million and $25 million.
The Mediterranean Revival-style Higginbotham School opened in 1927 in a working-class African American neighborhood, according to a 2020 study conducted by the city. Due to racial segregation and redlining, the school “served as Detroit’s all Black elementary school for over eighty years,” the report says. It became a charter school in 2006 and closed in 2013.