Insights on the Transformation of Detroit
- Nov 04, 2014
By Veronica Grecu, Associate Editor
Detroit—For many American cities, the end of 2007 marked the bitter start of what now experts call “The Great Recession”: the collapse of large financial institutions that shattered the economy, freezing investor activity and causing downturns in stock markets. It was a matter of time until all business sectors fell just like dominoes, leading to the loss of millions of jobs throughout the country, cutbacks in consumer spending and the inevitable crash of the housing market.
Officially, it took almost two years for the recession to end—the National Bureau of Economic Research determined that a trough in business activity occurred in the U.S. economy in June 2009—and since then most of the cities have been on the recovery track. Among them, Detroit: the former automotive capital of the world that is now known as the largest municipality in the U.S. to file for bankruptcy. But the ghost-like Detroit turned out to be a tremendous opportunity for real estate investors, and one of them has become a sort of local superhero.
Dan Gilbert is a wealthy native of Detroit and founder and chairman of Quicken Loans, the largest online home lender and third largest retail lender in the United States. For the past four years he’s been busy buying properties left and right through his real estate investment arm Bedrock Real Estate Services, renovating them and then throwing them back on the market to draw other businesses in the core of Detroit.
Though nationally he’s still known as the owner of the Cleveland Cavaliers, Dan Gilbert’s reputation of real estate mogul and savior of Detroit has picked up steam in the news media. Getting to speak with the man himself these days is like searching for the Holy Grail, but his team at Rock Ventures—the umbrella entity that was formed to provide coordination and guidance for the portfolio of companies—offered some valuable insights into Gilbert’s investments in this once-neglected city.
The adventure started in 2010, when Dan Gilbert and Jim Ketai started Bedrock Real Estate Services, Rock Ventures’ full service property management firm. The reason behind Bedrock was the desire to reinvent Detroit and Michigan’s economy while honoring and restoring many historic landmarks in the city. Since January 2011, Bedrock has invested more than $1.3 billion on more than 60 properties—which translate into more than 9 million square feet of commercial real estate located in Detroit’s central business district.
Back in 2010, when Quicken Loans moved its headquarters to downtown Detroit, the city was going through a modern-time exodus in terms of workforce, with its talent pool rapidly declining. Quicken Loans saw this as an opportunity to play a role in developing a high-tech and innovative urban core where people want to live, work and play. The city’s downtown area made the most sense for the business and for its entrepreneurial efforts as it offered the magic combination of density with people, activities, events, collisions and great spaces—which accounts for Quicken Loans’ successful move to Detroit. As a result, the 12,500 team members working in downtown Detroit are energized and committed to being a part of the city’s transformation, adding to a wave of more than 100 companies such as Chrysler, Twitter, Shinola and Lowe Campbell Ewald that have moved in this part of the city since 2010.
In 2013 Detroit filed for Chapter 9 and became the largest bankrupt municipality in the United States. Far from seeing these unhappy financial circumstances as a set-back for the now-famous buying spree in the city, Gilbert’s group of companies became more committed than ever to Detroit and the opportunities downtown, where the quality of life and businesses are more vibrant than they have been in decades. For this particular investor, bankruptcy became the first step toward a better and brighter Detroit. The city is still struggling to overcome a slew of challenges, but the future looks good for the troubled Motown. Once the financial hurdles are passed, our sources at Rock Ventures say that the city, state and region will finally have a clean slate to operate with a philosophy and strategy that works for its citizens, businesses and the entire community.
So far Dan Gilbert’s grand plan for the transformation of Detroit tackled mostly commercial and mixed-use properties—but in his effort to make sure more people work downtown, the investor and his group of companies are also heavily focused on residential and ground-level retail ventures to create vibrant activity on the streets of Detroit. One particular aspect in the city’s revitalization is M-1 Rail, a public-private partnership designed to improve downtown and midtown Detroit’s transportation infrastructure and provide direct access to 125,000 jobs and 275,000 residents. The $140 million project broke ground in July 2014 and is funded by both philanthropic foundations and leading regional institutions and corporations, including Rock Ventures. The 3.3-mile light rail system will stretch from Grand Boulevard to Congress Street and, once completed around the end of 2016, will bring approximately $500 million worth of economic development.
Our inside sources at Rock Ventures also mentioned the incredible startup scene that’s gaining momentum in Detroit. With technology and connectivity being key factors in revitalizing a city, good old Motown has developed a veritable startup culture that can turn it into the next “startup city.” The reasoning behind this idea is quite simple: startup leaders benefit from low costs, access to an amazing talent base coming from world-class universities, central geographic location and, more important, grit and determination. The M@dison Block—which refers to the entire block of buildings near Grand Circus Park in downtown Detroit—is the city’s “farm” for emerging businesses and was recognized as one of Google’s Seven Tech Hubs in North America in fall 2013. The historic M@dison Theatre Building anchors the six-building block, which is home to more than 100 startup businesses.