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Old Posted Oct 18, 2014, 5:34 PM
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Behind every crumbling downtown is a billionaire who wants to save it

Behind every crumbling downtown is a billionaire who wants to save it


7 Oct 2014

By Heather Smith

Read More: http://grist.org/cities/behind-every...ts-to-save-it/

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.....

One of the myths of Detroit is that it’s a frontier town — wide open, and a place where anyone can make a mark. Like a lot of frontiers, though, fences have already been laid, even if you can’t see them. Much of the downtown that is south of Adams Street is owned by Dan Gilbert.

- Gilbert has moved Quicken headquarters downtown. He still lives in the suburbs, but he’s provided mortgages and rent subsidies to employees who are willing to move into the city. One of the conditions of accepting money from Detroit Venture Partners, Gilbert’s venture capital firm, is agreeing to relocate to Detroit and set up shop in one of his properties. Walking around downtown during business hours, you get the feeling that someone has assembled a collection of young white men in v-neck sweaters and stylish eyeglasses and scattered them over the urban street grid. That someone would be Dan Gilbert.

- Gilbert has installed free security cameras in every local storefront that is willing to let him, and he’s hired a private security force that patrols downtown and responds to calls in three minutes. He has monthly meetings with the sheriff and the chief of police. He’s put up money to run a light-rail line down Woodward Avenue. People in Detroit talk about Gilbert like he’s the Wizard of Oz, and that might be the closest analogy. He may be a land-hungry billionaire — but he’s the most civic-minded land-hungry billionaire the city has seen in a long time.

- By contrast, much of southwest Detroit is owned by Matty Moroun, best known for being the only person to own a major American border crossing, and most of downtown north of Adams Street is owned by Mike Ilitch. Ilitch, who made his fortune founding the Little Caesars Pizza chain, operates in a manner that is more old-fashioned slumlord. Ilitch buys property, often secretly, and lets it decay, so that it brings down the value of the property around it. Then he buys the neighboring property, and lets it run down too, so that he can buy even more property, until he’s amassed enough blighted property to go for the end stage.

- The end stage is persuading the city to put up enough funding so that he can raze the entire area and put in the kind of flagship property — most recently, a new Red Wings stadium surrounded by market-rate housing and retail — that shakes down the big redevelopment dollars. When I arrive, the 45 blocks that have been cleared for the new project, called District Detroit, is an impossibly long stretch of rubble, with a billboard hovering over it. “Imagine,” the billboard says, “a place.”

- But the thing that makes Dan Gilbert a big player in Detroit — his ability to buy and rehab large buildings — is novel because not many other people can. While it’s possible to buy a house for as little as $500 through a city, county, or state auction, it’s nearly impossible to get a loan to, say, pay out $6,000 for a new boiler, or the $10,000 to replace a roof. It’s even harder to secure the kind of financing that would rehabilitate a commercial or apartment building. This is a key reason why Detroit’s buildings have fallen into so much disrepair over the years.

- Will “the 7.2″ — as the section of downtown that Gilbert has focused his energies on is known — do better than Hsieh’s one square mile of Las Vegas? Real estate values are rising within the 7.2, to the point where the low-income senior citizens who have been downtown’s most stable population are being evicted by developers. It’s entirely possible that even if Gilbert manages to transform the 7.2 into a thriving commercial district, it will exist as a bubble of relative prosperity without much effect on the larger city, like the neighborhoods of Indian Village, Palmer Woods, and Sherwood Forest (which, like the 7.2, pay for their own private security).

- Meanwhile, the storefronts along Woodward are still almost completely empty. Gilbert has talked about reviving the high-end shopping district that Woodward Avenue was before the 1960s. So far, Moosejaw, a fancy athletic goods store, is the only anchor of this new district — along with a store that sells Detroit memorabilia, but only opens when there’s a game playing at one of the stadiums.

- In the last few years, there’s been a lot of talk about the unequal distribution of capital in the United States — the wealthiest 1 percent of Americans receive 20 percent of the income earned across the country. The effects of this have been many and varied, but one of them has been the creation of a new class of philanthropists who can shift the policy winds in any realm that interest them with the sheer force of their jingling moneybags. Tom Steyer and Michael Bloomberg have done this with climate change. Bill Gates has done this with public health and education. Dan Gilbert and Tony Hsieh are now doing this with downtown urban revival.

- Detroit deserves more than to lie in wait like some kind of fairytale princess for a real estate tycoon to come along and spruce her up. But until someone other than a Dan Gilbert can afford to buy and fix up buildings that are down on their luck, that seems to be the way the game is played.

.....



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  #2  
Old Posted Oct 18, 2014, 5:43 PM
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Interesting article. As I've said before on this site, it's a complete joke that the fucking Sierra club or whoever can expect hundreds of millions of donations from the Gates's and Bloombergs of the world, to hire more lawyers and hold charity galas for movie stars or whatever, while American philanthropy completely ignores the needs of distressed US cities. Guys like Gilbert are to be heartily applauded.

Ilitch sounds like a real scumbag.
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Old Posted Oct 18, 2014, 6:06 PM
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One downtown that I would like to see transformed is downtown Newark,NJ. Its a bustling, prosperous downtown, but its not at its full potential. I'm looking forward to experiencing a boom in Newark. We have a couple of sizable projects in the pipeline, but its not at the level that it should be especially considering its location. Lots of potential.
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Old Posted Oct 18, 2014, 6:09 PM
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Since Donald Trump is in the real estate business, perhaps he can save a downtown or 2.
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Old Posted Oct 18, 2014, 6:11 PM
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Originally Posted by dc_denizen View Post
Interesting article. As I've said before on this site, it's a complete joke that the fucking Sierra club or whoever can expect hundreds of millions of donations from the Gates's and Bloombergs of the world, to hire more lawyers and hold charity galas for movie stars or whatever, while American philanthropy completely ignores the needs of distressed US cities. Guys like Gilbert are to be heartily applauded.

Ilitch sounds like a real scumbag.
part of being in America is being able to do watever you want with your money. When you become a billionaire you can invest it in whatever city you like. Detroit and Las Vegas are very fortunate to have people who are invested in their cities. But don't expect they're just doing it out of kindness, they obviously are betting they will get returns on their investment.
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Old Posted Oct 18, 2014, 7:25 PM
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I agree that Gilbert is to be applauded. I do, however, think he gets more press than many of his peers because he's focused on turning around Detroit, which while admittedly a more daunting task than turning around a lot of other cities due to some of the extreme underlying issues there, isn't necessarily a very unique story.

Trump is a media whore of a developer, who I'm entertained by, and I mean "media whore" sincerely since our industry needs these faces and he plays the part really really well (and admittedly I love watching The Apprentice/Celebrity Apprentice), but he is but one of many many successful, motivated, passionate developers, many of whom are more successful than Trump (and without the proceeds from TV shows/media rights).

I think Gilbert gets more press than he would otherwise get in any other city because he is affiliated with Detroit. I also think there are tons of real estate developers across the country both trying to make $$$ (logically) and trying to make a positive difference in their communities at the same time. Honestly, I'd even put Silverstein in the same boat. He puts up a lot of ritzy lower Manhattan towers, but he's been passionately dedicated to Lower Manhattan's development and revival for decades, risking a lot, going through A LOT of personal heart ache (I'm pretty sure 9-11 impacted him personally, emotionally at least as much as ANYONE, and he's leading the recovery), etc etc.

Philadelphia has some great developers. New Jersey has some great developers. St. Louis and Atlanta. Los Angeles and Portland. Real estate developers in general are pretty passionate about what they do (as opposed to most of the rest of the "finance" sector...lots of people who go to the country's top undergrad business programs have a choice: investment banking/"consulting" or going into private equity real estate or something similar. Those who go straight into real estate often do the same sort of work as bankers, more or less, sacrifice pay and prestige, and are doing so because they are truly into real estate. Perhaps the next class of developers who strike out on their own after business school or successful stints at various firms. What can I say? People involved in real estate in general are far more passionate about what they do than I can say seems to be the case for most industries. Many real estate finance guys know the math and how to run numbers and structure deals, but at their core they are more interested in design, the process, construction, lasting impacts, etc.

I appreciate that Gilbert gets a lot of praise, but I praise the industry as a whole and all the behind the scenes developers who are doing just as much without the press attention.
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Old Posted Oct 18, 2014, 8:47 PM
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Its too late, sorry. There's no future in Detroit

Also,

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Originally Posted by hudkina View Post
other than that Detroit is a sack of shit that needs to die already.
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Old Posted Oct 18, 2014, 9:49 PM
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I agree, Simms, about passionate developers, particularly the local ones. They're often a mix of SSP-type fan and entrepreneur. They want people to like their products much like a chef would, or like any of us would. But they also want the city in general to get better. In my city there's often a walkability/environmental slant.
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Old Posted Oct 19, 2014, 10:49 AM
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Detroit interests me

Can someone , in a few words , explain to me why Detroit is not doing too well ?
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Old Posted Oct 19, 2014, 10:53 AM
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So far , other than a few pictures of Empty buildings , Detroit looks like a lovely place !

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Old Posted Oct 19, 2014, 11:59 AM
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gilbert is not to be applauded --- he is sucking money out of cleveland that he reinvests in detroit's downtown. he hasn't fulfilled his obligation to build out phase II of his money-hoovering casino and i doubt he ever will. robbing peter to pay paul is not worthy of anything.
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Old Posted Oct 19, 2014, 3:58 PM
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Quote:
Originally Posted by GO_UAE View Post
Detroit interests me

Can someone , in a few words , explain to me why Detroit is not doing too well ?
Basically globalization and also unbridled capitalism that would allow the vast majority of the United States heavy industries get outsourced to cheaper countries like Mexico and China (pay someone $.50 cents per hour to build a car instead of $15.00 an hour in Cuidad Juarez instead of Detroit) and many others which left millions of people in the northern US great lakes region (Rustbelt) out of work or with much much lesser jobs so the cities crumbled.
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Old Posted Oct 19, 2014, 4:01 PM
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Our economic system sold out the working men who built it in a way that just wouldn't happen in other top countries like Germany, France, Denmark, etc
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Old Posted Oct 19, 2014, 4:44 PM
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Quote:
Originally Posted by mrnyc View Post
gilbert is not to be applauded --- he is sucking money out of cleveland that he reinvests in detroit's downtown. he hasn't fulfilled his obligation to build out phase II of his money-hoovering casino and i doubt he ever will. robbing peter to pay paul is not worthy of anything.
Do others agree?

Without knowning anything, I wonder if he views the two cities independently....the Cleveland thing for its own spreadsheets, and the Detroit thing for its spreadsheets and a desire to improve the city.
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Old Posted Oct 19, 2014, 7:20 PM
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Dan Gilbert is a Detroit native. The only reason he has invested in Cleveland is because he owns the Cavaliers. He certainly isn't taking money out of Cleveland for Detroit's benefit. I'm not sure how that would be logical, considering his money ultimately originates from his Detroit operations... He may not be as invested in Cleveland as he is in Detroit, but that's because he is more passionate about his hometown. Having said that, he has done a lot of good for Cleveland for being an outsider.
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Old Posted Oct 19, 2014, 8:20 PM
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So far , other than a few pictures of Empty buildings , Detroit looks like a lovely place !

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Detroit has a lot of abandoned working-class neighborhoods and industrial ruins. It also has a disparately high crime and poverty rate for a U.S. city. Because of these two factors, many people on this forum and in the nation in general have a particularly negative opinion of the city. (Especially those from what are generally considered prosperous Southern and Western metropolitan areas.) People in the Industrial Midwest and Northeast as well as international cities, tend to have a more reasonable viewpoint of the city.

There are two stories to Detroit. One deals with industrial globalization and the other deals with race and class warfare. Both go hand in hand. In the early part of the 20th century, Detroit went from being a typical midsize Great Lakes industrial center, to being arguably one of the largest and most important urban centers in North America after New York and Chicago thanks to the automobile. Within a few decades the city population ballooned from a few hundred thousand to about 2 million.

Everything was generally fine up until the early post-WWII era. Up until that time anybody who wanted a job could find one. Many of the largest auto plants had upwards of 10,000 workers. During WWII, when much of the city's workforce was off fighting, many of the jobs in Detroit were picked up by women as well as black southerners. Up until the 1920's, Detroit didn't have a black population to speak of. However, through the 30's and 40's, southern blacks migrated into the city so that by the end of WWII the black population of the city was relatively high. During the war, many blacks were able to find work, but once the mostly white WWII fighters returned home, jobs for blacks became scarce. Despite this, southern blacks continued to stream into the city looking for work.

During the 50's, many white city residents began moving to the new suburban neighborhoods popping up just outside the city boundaries, thanks largely to the GI bill. It is also during this time, that many automakers were finding their factories to be outdated for modern auto manufacturing. Because the city lacked the available space for their massive new factories, they too started moving to the suburban fringe. This practice drew Detroit's economic center away from the core.

The decade of the 50's is also well-known for racial strife, and the early rumblings of the civil rights movement. Tensions between whites and blacks were rising, particularly over jobs. When whites returned home from the war, they took back a lot of jobs that blacks had filled during the war. Because of this, black unemployment and poverty skyrocketed. This was especially severe in Detroit thanks to the automation that occurred in the modern auto plants. A modern post-war factory could produce the same number of vehicles with just a few thousand workers, instead of the 10,000+ workers that was the pre-war norm.

By the 60's, most whites began moving to the suburbs to be closer to the new factories that were popping up in cities like Warren, Sterling Heights, Livonia, etc. For the most part, blacks were excluded from moving to the suburbs, and as job opportunities continued to dry up in the city, emotions started boiling over. In 1967, there was a major race riot in the city as blacks rebelled against their status as 2nd-class citizens. While the city's white population had been steadily declining since the early post-war era. The riot as well as the government efforts to redress the racial strife (i.e. forced busing) had the effect of driving even more whites to the suburbs.

By the 70's, the white population made up less than half the population of the city. While many industrial jobs had migrated to the suburbs as early as the 50's, the 70's began seeing downtown corporate jobs head north as well. The 70's also saw a dramatic rise in crime (nationally as well as within the city) due to the economic turmoil and lack of urban job opportunities.

The drug epidemic of the 80's didn't help things, and it is this decade that the city began seeing entire neighborhoods abandoned. Up until the 80's, the inflow of blacks from the south was high enough to stem much of the outflow of whites to the suburbs. However, as economic opportunities in the south rose, and economic turmoil in the north continued, the stream of southern blacks basically stopped. By the 90's, the condition of the city, particularly the early pre-war working-class neighborhoods, was rough. It is also during this decade that the city government began to struggle with providing even the most basic services like public safety, lighting, etc.

The urban revival that began in a lot of cities in the 90's, did have a somewhat positive effect on the city. As the drug epidemic that began in the 80's subsided, crime rates began falling through the early 2000's. However, the continued loss of jobs to both mechanization and globalization ensured that the city continued to lose people. When the Great Recession hit the U.S. and the housing bubble collapsed, many urban blacks that had been excluded from the suburbs (at first due to good old fashioned racism and later housing prices) began seeing a real opportunity to move out of the city. This caused another major collapse in the city population, as while white flight had completely decimated the population of the city, the new phenomenon of black flight heightened the erosion.

The city that had been struggling for decades to stay afloat, basically collapsed as the middle-class black population that had remained loyal to the city moved on to greener suburban pastures. Because of this, as well as the economic effects of the recession, the city became bankrupt and even the traditionally middle-class neighborhoods started seeing blight creep in.

However, while the continued economic downward spiral continues to plague the city to this date, the urban revival that slowly started in the late 90's has allowed the downtown core to see a new light. While the Great Recession caused a few bumps in the road, things have been turning around, particularly in the last five years. While the ravages of the past five decades will continue to haunt the city for decades to come, there is a glimmer of hope for the city that hasn't been felt in decades.
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Old Posted Oct 19, 2014, 8:59 PM
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This is worth noting as well: It's hard to be considered a postindustrial wasteland when you make 2.5 million cars per year. Something like 4/5 of the production is in the Detroit MSA, if I recall.

Quote:
In 2013, Michigan motor vehicle production totaled 2.5 million – up 9.5 percent from 2012. Michigan’s 2013 motor vehicle production represented the State’s highest annual production level since 2005. Nationally, motor vehicle production totaled 11.1 million – up 6.7 percent. At 22.3 percent, Michigan’s share of national production increased 0.6 percentage point between 2012 and 2013.

Over the last four years, Michigan’s motor vehicle production has more than doubled – rising from 1.1 million units in 2009 to 2.5 million units in 2013. While comprising 19.9 percent of 2009 national motor vehicle production, Michigan accounted for 24.8 percent of the overall national motor vehicle production increase between 2009 and 2013.
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Detroit, like some other regions looks comparatively worse than the economic stats would indicate.

As far as investing in the city, I think the returns for concentrated investment in many rust belt downtowns could be extraordinary, with any luck. I'm watching Cincy as a potential test bed, given the progressiveness of their downtown corporate partnership. You need to achieve critical mass, is this thing.

People will highlight all the risks, but American capital has been ploughed into far more ludicrous, arbitrary, and poorly-returning projects over the past twenty years than urban redevelopment, after all. My industry has seen tens of billions down the tubes, equity written off and debt trading at 50% on the dollar or less.
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Old Posted Oct 19, 2014, 10:29 PM
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hudkina, that's an outstanding narrative of change over time. Ever consider a career as a historian?
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Old Posted Oct 20, 2014, 12:50 AM
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hudkina, that's an outstanding narrative of change over time. Ever consider a career as a historian?
Yes, great job indeed hudkina! Hudkina's piece is as always very well written and thought out.

I view Detroit as a victim of a number of circumstancial letdowns, which does not take away responsibility from the principal actors in this drama, but goes a long way to explain some of the harsh reality of American society at large.
Detroit is a compacted cartoony story of this drama, and as such deserves to be looked at in a special light, with a peculiar humor.

As for our mr Gilbert, I think that he is well meaning. He may have a capitalist agenda that goes hand in hand with a social conscience. I believe that he can have a positive effect on the core's rebirth and hopefully beyond. You can't spit on investment in Detroit, unless of course it brings obvious harm on the city. Let's keep a close eye on him but be fair.
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Old Posted Oct 20, 2014, 1:04 AM
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Detroit in the 1970s-1990s had black leadership, black police, black middle class, black civil service, black teachers. It was very, very prosperous, comparatively--not the boilerplate victim of rapacious American capitalism and racism that it's been portrayed as. The comparison to Soweto (saw this on another thread) is anti-American and insulting. it's very dangerous to simplify history to fit a political viewpoint from today.

The auto industry was strong for basically this entire time, and supported the city (ren Cen, hamtramck assembly, etc). Compare to Pittsburgh - steel completely decimated. Youngstown sheet and tube: 20,000 workers (mostly white btw) fired in a single day in 1979. Meanwhile Detroit was doing fine in those years.

Racial conflict existed, but at least people didn't massacre eachother. The only casualty was the urban fabric. But yeah, the rot really started in the 2000s when the black flight era arose and integration became universal. Things could have gone the other way - towards an Atlanta say, or a DC, if Detroit (and Michigan) had had better leadership and better luck.
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