Developer pulls out of Book Cadillac Project

[Allan]

Two days of bad news in a row for Detroit . First the Madison-Lenox, now this! I've always feared this would happen....and it did. It can still be renovated, but by whom? And what about the great big holes in the side of the building? They have to at least board them up! The building cannot deteriorate even further. The skin of the building is pulling away from the structure (or so I've heard). It is because of this that the building must be saved NOW. If something is not done to stablilize the building within 12 months, it's as good as gone .

Developer pulls out of Book Cadillac project

By Robert Ankeny

January 13 12:05:00, 2004

The long-hoped-for renovation of the historic Book Cadillac Hotel got another setback today, when the developer, Historic Hospitality Investments L.L.C., announced it is dropping the project.

Historic Hospitality is a subsidiary of Dallas-based Kimberly-Clark Corp. (NYSE: KMB).

[bobliocatt]

sorry to hear about this, I really want to see this building redeveloped. However, I think the city & state need to help the developers with the financing of this project. Older buildings cost a ton of money to restore, and one massive and in such decay as the Book-Cadillac must cost a fortune rehabilitate. No developer is going to touch or invest in that property unless a profit can be made in the end.

[bobliocatt]

So if this and the casinos, won't be done by the time the super bowl comes to town, what will?

[Allan]

So if this and the casinos, won't be done by the time the super bowl comes to town, what will?

That's a real good question. Campus Martius Park will be completed. Also, there's a chance the the next building of the Campus Martius redevelopment project will be under construction. Hopefully the conversion of the Slater Hotel into apartments will be underway as well. Most of the other completed projects will probably be smaller...lots of new residential lofts will be done by then (Merchant's Row & the Kales Building conversion). Also, there will be more stores downtown, but especially restaurants. Also, the Washinton Boulevard Streetscape will be completed, along with other streetscape projects downtown. The two 25 story towers for UDM will also have broken ground by that time. I'm sure there are other things too, but I can't think of any right now, & it's hard to keep on top of all that stuff when you live 60 miles from downtown. It would be much better if we could get the Book-Cadillac & Casino Hotels done by the Super Bowl. Oh well. This is Detroit....we'll take whatever we can get.

[Allan]

Wednesday, January 14, 2004

Price tag to renovate hotel may be $175 million

Some are confident historic Book-Cadillac can be brought to life

By R.J. King / The Detroit News

DETROIT

[Allan]

Deal to renovate Book-Cadillac off; new one's in works

Plan for costly project expected within weeks

January 14, 2004

BY JOHN GALLAGHER

FREE PRESS BUSINESS WRITER

In a blow to Detroit's redevelopment efforts, the $150-million deal to renovate the Book-Cadillac Hotel has fallen through.

Kimberly-Clark, the Dallas-based corporation that had planned to do the renovations, informed the city this week that rising costs and lower revenue estimates made the deal impossible to pursue.

The deal foundered on a financing gap of $30 million, city and company officials said Tuesday. That gap was caused partly by higher-than-expected construction costs and lower-than-hoped new revenue estimates.

But down may not mean out. Detroit Mayor Kwame Kilpatrick and development aide George Jackson, president of the Detroit Economic Growth Corp., said Tuesday that they hoped to soon replace Kimberly-Clark with another developer.

Kilpatrick told the Free Press editorial board that the city hoped to announce a new deal as early as next Monday. He wouldn't name the new party, but said it was a "very credible" developer from outside Michigan with hotel experience.

Jackson, in a separate interview, said he hoped to ink a new deal in a matter of "weeks, not months."

"We're still confident we can do this deal," he said.

Even so, there was no question the loss of Kimberly-Clark was a disappointment. The company operates a subsidiary called Historic Hospitality Investments that develops projects such as the Book-Cadillac around the country. Kilpatrick had announced the deal to renovate the hotel with great fanfare in July.

The deal would have remade the Book-Cadillac into a 485-room hotel with an additional 80 apartments or condominiums. Financing consisted of an array of tax credits, loans and grants from the city, state and federal governments, along with Kimberly-Clark's private investment.

The landmark Book-Cadillac, which opened in 1924 but has sat empty and deteriorating for the past 20 years, was to serve as a cornerstone of the city's efforts to revitalize its downtown in time to welcome 100,000 visitors and the media during Super Bowl week in early 2006.

With just 24 months until then, Jackson said Tuesday that there's still time to finish renovating the Book-Cadillac as long as a new developer signs on soon.

To move things along, the city has ordered contractors to remove asbestos from the building. That's something that would have to be done either to renovate or demolish the structure. Crews were working at the hotel this week.

Construction work had barely gotten under way at the hotel last year when work halted. Lynn Fournier, a Kimberly-Clark executive who had negotiated the deal, left the company amid reports of cost problems with the Book-Cadillac and a similar project in St. Louis. The company's re-evaluation led to this week's decision.

"With regrets, we informed the city and state that we are withdrawing from the project," Kimberly-Clark spokesman David Dickson said Tuesday, adding that the company "determined that the project is no longer economically viable.

"We did work closely with the city, the county and the state during that re-evaluation to pursue other financing to try to move forward, but in the end, there was just no way to close a significant financing gap between the original and revised project economics."

The gap emerged for two reasons: One was higher than expected construction costs; the other was a new revenue forecast that was less optimistic than the initial one. "When you put those two together, it led to a significant gap that we just couldn't close," he said. Dickson stopped short of saying that no other company or investor could do the deal economically. "I really couldn't speculate on that for others," he said.

In his meeting with the Free Press, Kilpatrick emphasized that Kimberly-Clark's withdrawal "had nothing to do with the city."

"They underestimated the construction costs," he said. "They came in and said, 'It's going to cost us this much to build,' and then went into the building, and it was a totally different figure, and tried to come back to the city and say, 'We need that from you.'

"We made up about half of that difference and told them to meet us halfway, and they said, 'No' and walked away. And we had another developer that came up and said, 'Let's start talking. We want to do it.' "

Contact JOHN GALLAGHER at 313-222-5173 or [email protected].