2006 Section 108 Project Summaries - Michigan

Fort Shelby Hotel
Detroit, MI
Section 108 Guaranteed Loan- $18,700,000

The City of Detroit will provide financing to FS Hotel, a for profit Limited Liability Corporation (LLC), which is being created by MCP Development Inc. and RSC & Associates, for the acquisition and renovation of the 337,000 square foot Fort Shelby Hotel, a vacant, blighted structure which is on the National Register of Historic Places. FS Hotel, LLC, will use the City's loan to finance the redevelopment of the existing structure into a 204 room Doubletree Guest Suites Hotel, a 38,000 square foot conference center, 1,200 square feet of retail space, and 97,586 square feet for 63 market-rate residential units. Also, an adjacent obsolete structure will be acquired and demolished for the construction of a 200-space parking garage. Upon completion, FS Hotel, LLC will own the property and the parking structure.

The City will re-lend the guaranteed loan proceeds, through a subrecipient agreement, to its Downtown Development Authority (DDA), which will in turn re-lend the proceeds to FS Hotel, LLC. The Section 108 Guaranteed Loan will be used only for the hotel portion of the project. In conjunction with the Section 108 Guaranteed Loan, the City will use $24,000,000 in first mortgage debt funds and $18,078,775 in Historic Tax Credit Equity funds for a total project cost of $73,740,536.

The Community Development Block Grant (CDBG) national objective for the City's use of the guaranteed loan proceeds is to aid in the elimination of blight on a spot basis and to provide special economic development assistance to a for profit entity to benefit persons of low-moderate income through job creation. The project will create an estimated 374 new full-time jobs, 90% of which will available to or held by persons of low-moderate income.

The City will repay its Section 108 Guaranteed Loan over a 20-year period, paying interest only for the first five years. To insure the repayment of the guaranteed loan, the City pledges to HUD its interest in the DDA loan to FS Hotel, LLC, which is secured by a second lien position on hotel portion of the building. The City also pledges its CDBG funds as security for the repayment of its Section 108 Guaranteed Loan.

Westin Book-Cadillac Hotel
Detroit, MI
Section 108 Guaranteed Loan- $18,000,000

The City of Detroit Downtown Development Authority (DDA) will provide financial assistance to The Cadillac Development Company, a for profit Limited Liability Corporation (The Developer), for the redevelopment of the Book Cadillac Hotel, located in the central business district of the City. The site is in the City's federally designated Empowerment Zone. The project will consist of redeveloping the Book Cadillac Hotel into a mixed-use site consisting of a hotel/retail component, a residential component, and a parking garage. The hotel/retail component will consist of a 455 room Westin Hotel which will include a 31,000 square foot conference center, a fitness facility, and 119,000 square feet of retail and restaurant space on the street level. The residential component will consist of 67 units of market-rate condominiums built on the upper levels of the structure. These components are to be owned by The Cadillac Development Company, LLC, which is owned by JTMK-Cadillac, Ltd.

The DDA will build and operate a 550 space parking garage with 100 spaces designated for residential use.

The City will re-lend the proceeds of its Section 108 Guaranteed Loan to The Cadillac Development Company, LLC to assist in financing only the construction of the hotel component of the project. Other sources of funding committed to the project funding include a $50,000,000 mortgage from I-Star Financial and $20,750,200 from investors in Federal Historic Tax Credit equity. The total project cost is estimated to be $168,125,112.

The Community Development Block Grant (CDBG) national objective for the City's use of the guaranteed loan funds for special economic development assistance to a for profit entity is benefit to low-moderate income persons through job creation. The project will create an estimated 400 to 450 new full-time jobs of which at least 51% will be available or held by low-moderate income persons.

The City will repay its Section 108 Guaranteed Loan over a twenty-year period, paying interest only for the first five years. The source of the City's payment of debt service for its guaranteed loan will be revenues from the project Developer generated by income from the hotel portion of the redeveloped building. In order to secure the repayment of the guaranteed loan, the City pledges its interest in its third party loan to the Developer, which will be secured by a second lien on the hotel portion of the redevelopment. Also, as security for the guaranteed loan repayment, the City pledges its CDBG funds.

Woodward Garden Block
Detroit, MI
Section 108 Guaranteed Loan- $19,000,000

The City of Detroit in collaboration with the for profit developer, Woodward SA-Ventures, Limited Liability Corporation (LLC), will redevelop eight parcels of blighted property into a mix complex of commercial/retail space, office space, a rehabilitated dinner theater, and parking spaces. Woodward SA-Ventures, LLC, mixed use development will include a rehabilitated 5,400 square foot restaurant and the historic 22,080 square foot Garden Theater, as well as the redevelopment of five of the eight parcels into 61,625 square feet of retail and office space, and a 413-space parking garage with 12,672 square feet of ground floor commercial/retail space.

The City will re-lend the proceeds of its Section 108 Guaranteed Loan to Garden Block Investment, LLC, an upper-tier investment entity that will leverage $7,497,000 in New Markets Tax Credit (NMTC) funding. The Garden Block Investment, LLC will invest the guaranteed loan proceeds and the NMTC funding as equity into New Markets Investment, LLC, a Community Development Equity (CDE). The CDE will use this equity funding to make an investment (a loan) in Woodward SA-Ventures, LLC for financing the mixed use redevelopment of the Woodward Garden Block, the Qualified Low-Income Community Business (QLICB). The total cost of the project will be $31,810,044.

The Community Development Block Grant (CDBG) national objective for the City's use of the guaranteed loan proceeds for special economic development assistance to a for profit developer is to benefit low-moderate income persons through job creation. The redevelopment will create an estimated 390 new full-time jobs, of which at least 51% of the new jobs will be held by or made available to persons of low-moderate income.

The City will repay its Section 108 Guaranteed Loan over a twenty-year period, paying interest only for the first seven years, since the CDE must invest all the NMTC equity in the QLICB for seven years, as required by the U.S. Department of Treasury. As security for the repayment of its Section 108 Guaranteed Loan, the City pledges its interest in its third-party loan to Garden Block Investment, LLC, which will pledge its partnership interests in the CDE. At the end of the seven years, the CDE will terminate and assign its first lien position on the completed site by Woodward SA- Ventures, LLC. As part of the security for the repayment of the Section 108 Guaranteed Loan, the City also pledges its CDBG funds.

500 Block Project
Flint, MI
Section 108 Guaranteed Loan- $3,840,000

The City of Flint will provide financial assistance to the Developer, 500 Block Investors, Limited Liability Corporation (LLC), for the renovation and remediation of three buildings on the west side of the 500 block of South Saginaw. The site is located in a HUD approved Neighborhood Revitalization Strategy Area (NRSA) and a Federally- designated Enterprise Community. The Developer will redevelop the buildings into a four-story 80,000 square foot building including approximately 30,000 square feet of office space, 20,000 square feet of restaurant/entertainment space, and 30,000 square feet for eight loft-type residential units. The State of Michigan's Economic Development Corporation (MEDC) will provide a lead role in oversight for the investment of the public funds in this project.

The City will re-lend the guaranteed loan funds to the Developer for the construction costs of only the commercial portion of this development: office/restaurant/entertainment space. In conjunction with the Section 108 Guaranteed Loan, the City will also use a $1,000,000 Brownfields Economic Development Initiative (BEDI) grant for the rehabilitation and remediation that will include removal of lead-based paint and asbestos in the existing structure. The total cost of the project is $10,322,695.

The Community Development Block Grant (CDBG) national objective for the City's use of the guaranteed loan proceeds is to benefit low-moderate income persons through job creation. The project will create an estimated 110 new full-time jobs.

The City will repay its Section 108 Guaranteed Loan over a two-year period, paying interest only for the first year. The Developer will pay off the City's construction loan with permanent financing upon completion of the project to repay the guaranteed loan. To secure repayment of the guaranteed loan, 500 Block Investors, LLC will provide an irrevocable Letter of Credit for $3,899,100. The City also pledges its CDBG funds for repayment of its guaranteed loan.