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G.M. Helps to Drive a Detroit Revival

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NY Times

September 15, 2004

G.M. Helps to Drive a Detroit Revival

By ROBERT SHAROFF

DETROIT, Sept. 14 - The largest private landlord in downtown Detroit, the General Motors Corporation, is nearing the end of a major renovation of its riverfront headquarters complex that has significantly transformed one of the city's most iconic structures.

In addition, G.M. has announced preliminary plans for a 25-acre mixed-use development on land it owns adjacent to the complex and is playing a major role in the city's effort to redevelop the mainly blighted riverfront into a mixed-use community that combines retail and residential space with public improvements like parks and marinas.

The activity grows out of the company's decision in the mid-1990's to acquire the 5.5-million-square-foot Renaissance Center as its new world headquarters. The center consists of four 39-story office towers and a 74-story hotel atop a large five-story retail atrium.

G.M. bought the complex for about $75 million, a fraction of what it cost to build in the early 1970's. Since then, it has spent upward of $500 million on a top-to-bottom renovation and has also acquired several additional properties in the area.

"They're quite the big fish," said David L. Littmann, senior vice president and chief economist at Detroit-based Comerica Bank. "They got the real estate at a very good price and are leveraging it in their favor."

Matthew P. Cullen, G.M.'s general manager for economic development and enterprise services, said, "We made a very cognizant choice to invest in the city."

But he emphasized: "This was not a philanthropic gesture. It was a business decision that was intended to be consistent with our philosophy that in order for G.M. to be successful, the communities in which we are located have to be successful."

The renovation - by the architecture firm of Skidmore, Owings & Merrill - corrects problems that have plagued the center almost from the day it opened.

The center was erected by a consortium of local business interests led by Henry Ford II, G.M.'s rival, as a response to the race riots and general decline that crippled Detroit in the late 1960's. The architect was John Portman, then famous for a series of mixed-use projects that incorporated vast interior atriums.

"It was the first of the silver bullets that were going to solve all the city's problems," said Robin Boyle, associate dean of the College of Urban, Labor and Metropolitan Affairs at Wayne State University in Detroit. "The idea was that it would provide the city with a springboard to the 21st century."

From the beginning, however, there were complaints about the complex's fortresslike appearance and what was deemed a confusing interior circulation plan.

Criticism centered on a 30-foot concrete berm in front of the complex on Jefferson Avenue that seemed to wall it off from the rest of downtown.

"It was very foreboding," said Peter Zeiler, business development coordinator for the Detroit Economic Growth Corporation, a nonprofit group that acts as a liaison between the city and private developers.

Mr. Boyle said: "The building has never been user-friendly. It was seen as a symbol of exclusion."

G.M. has removed the berm - at a cost of $30 million - and relocated its mechanical systems to the basement of the center. "If you're going to play a catalyst role in the city," Mr. Cullen said, "You can't have this physical barrier that agitates the heck out of everybody who sees it."

Inside the complex, the company has relocated the lobby of the 1,298-room Detroit Marriott Hotel at G.M.'s Renaissance Center to the third floor and smoothed out the circulation problems by installing a suspended glass walkway around the perimeter of the atrium.

"The challenge," said Richard Tomlinson, managing partner of Skidmore, Owings & Merrill, "was making the public areas of the building more about G.M. and less about the hotel."

Probably the biggest change, however, is the creation of a 14,000-square-foot glass winter garden, which looks out on the river.

The winter garden also serves as the complex's new retail hub. The center has about 230,000 square feet of retail space. G.M. also controls another 78,000 square feet of retail space in several adjacent buildings. Together, it amounts to about half of the total retail space in downtown Detroit. The results at the center, however, have always been mixed.

The retail vacancy rate is about 30 percent and - aside from Brooks Brothers, Jos. A. Bank, Waldenbooks and a few others - there is a significant lack of major national stores.

Now, however, the company has brought in a new leasing agent - the Houston-based Hines Interests - and is introducing a new entertainment-driven strategy.

Two white tablecloth restaurants recently opened and a third is on the way. One of the newly opened restaurants, Coach Insignia, occupies one of the well-known - but long-empty - restaurant spaces in Detroit: the two-level 21,000-square-foot space on top of the cylindrical hotel tower. The original restaurant revolved. Coach Insignia, named for a California vineyard owned by a member of the Fisher family of Fisher Body fame, is content with jaw-dropping but stationary views in all directions.

The restaurant is operated by the Unique Restaurant Corporation, a large independent restaurant and catering company based in suburban Detroit. "We worked out a deal based on percentages," said Matthew Prentice, president of Unique Restaurant. "If the costs get out of whack, the difference is borne by the landlord. But if it's a success, it's win-win on both sides."

In addition, a long shuttered four-screen movie theater complex will reopen early next year.

"Entertainment will bring people downtown," said Conrad Schwartz, G.M.'s worldwide director of asset management. "Our goal is to make the city of Detroit believe that you can come down to the Renaissance Center for a delightful evening."

Local real estate executives agree. "G.M. is putting more retail space on the market than there's been for a while," said James Bieri, president of the Bieri Company, a commercial real estate firm here. "But they're doing it wisely. They're choosing who they go after and working with them carefully."

The office portion of the complex is also prospering. "When we bought it," Mr. Cullen said, "the building was probably 30 to 40 percent vacant. Today, it's essentially full."

G.M. occupies about 60 percent of the office space in the original complex. The rest is leased to a variety of tenants.

All of this is raising hopes that downtown Detroit - long on the sick list of American cities - is set for a turnaround. "The central business district has improved over the last three to five years," Mr. Littmann said. "The biggest visible difference has been stability."

Mr. Bieri said: "We're starting to talk to some national retail companies. Five years ago, they wouldn't take your call. Three years ago, they would take the call and then diss you. Now there's enough going on where they want to talk."

All of this is a precursor to more ambitious plans. Since the late 1990's, G.M. has acquired about 25 additional acres along the Detroit River just east of the center. Most of the land is vacant. Now, however, the company says it plans to redevelop the area into a mixed-use neighborhood that will include retail, residential and possibly additional office space.

"We have a list of about 10 developers to whom we're talking," Mr. Cullen said. "Hopefully, this year or early next year we will pick a partner. "

The project dovetails with the city's plan to build a three-and-a-half-mile walkway along the city's riverfront. The plan is being coordinated by the Detroit Riverfront Conservancy, a nonprofit group; Mr. Cullen and Derrick A. Miller, the city's chief administrative officer, are co-chairmen of its board.

The estimated cost of the walkway is about $80 million, and most has already been raised through a series of grants and private initiatives.

"A city is not successful," Mr. Cullen said, "by having 10,000 G.M. folks drive in at 8 in the morning and out again at 5 in the afternoon."

"We want to be a catalyst for economic development and to provide leadership for the renaissance of the city," he said. "We want to bring in retailers and residential people. That's what we're trying to do at the Renaissance Center and in a much broader way along the riverfront."

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