The partial sale last week of the financially beleaguered Renaissance Center, once considered a symbol of hope by this city, is the latest in a series of economic troubles to hit the Motor City. But city officials say they still have hopes for the viability of residential and commercial developments planned for the riverfront area.
The brainchild of former Ford Motor Co. Chairman Henry Ford II, the Renaissance Center--including a 73-story hotel surrounded by four 39-story office towers--was supposed to breathe new life into Motown: The center's opening in 1977 was billed as a rebirth to Detroit's downtown riverfront area.
Instead, Detroit's auto-oriented fortunes have declined, and in turn, RenCen has lost nearly $140 million. If had not been sold, Henry Ford II said at a recent press conference, "the alternative was to go broke."
The group of investors headed by Chicago real estate magnate Theodore Netzky did not reveal the price of the project, but Ford said that the original investors are "taking out less money than they put in." The original cost of the complex was $357 million, and the owners included Ford Motor Land Development Co. and 50 other auto-related corporations, including Firestone Rubber, Rockwell International, Chrysler, General Motors and American Motors.
The sale, which is expected to be completed by June 30, does not include the two newer office towers being built by Rockefeller Center Inc. of New York and Ford Motor Land Development Co., according to Philip Routh, a spokesman for Ford Motor Land Co. A third phase originally scheduled for the Renaissance complex has been placed on the back burner due to high interest rates.
Higher interest rates, along with the downturn in the economy here, are being blamed for the large number of retail failures in the Renaissance Center shopping area.
Declining rents from RenCen shops were cited as one problem, and another problem has been lower-than-expected revenues from the center's hotel. The hotel occupany rate is running at only 50 to 60 percent, much lower than originally projected.
While occupancy in the office towers is running at a healthy 96 percent, leasing officials concede that they are getting less than the market rate for the floor space. With many leases now coming up for renewal, some are fearing that raising the rental rates will force some businesses and professionals to leave the office towers.
Since the center first opened--with a nationwide fanfare of publicity--Detroit residents have been criticizing it. They pointed out that its isolated location across Jefferson Avenue and behind a pair of concrete slabs hid it from the city it was geared toward helping.
Other property owners in the downtown worried that the project endangered the future of older buildings there by luring away long-time tenants. Others complained that parking facilities were inadequate, although city officials say that plans are in the works for additional space.
Still others who visited the center or shopped at the center complained that the center's design made it difficult to find their way around. Said one woman who works in a retail in the RenCen, "I've been working at the same store for nearly six months, and I still have trouble finding it."
The new owners have indicated that they will pump $60 million into the financially ailing center, although it is not clear when the money will come or how it will be spent.
Although the design problems at the center may have helped push the losses up, most analysts blame the souring economy for most of the center's problems.
But as if RenCen's sale weren't bad enough news for Detroit, the J.L. Hudson Co., admitting that it cannot solve the problems at its 2.1 million-square-foot flagship store downtown, announced recently that it intends to close the 70-year-old facility.
Hudson said that sales at the store have fallen to $45 million from a 1953 peak of $153 million. Alarmed Detroiters are currently rallying support for keeping the store open, and at its recent annual sale, Hudson's reported substantial traffic.
And city officials say they see some hope for the downtown in two riverfront developments with residential and retail components that are currently being planned. The projects are expected to cost a total of $160 million and will contain 1,000 apartments, two hotels with up to 1,500 rooms, about 100,000 square feet of retail space.
Detroit officials say the city will no longer be depending on one industry to keep its economy afloat and will be attempting to attract high-technology industries and other businesses to the downtown. "That way, if one industry experiences a decline, the city won't collapse," said Emmett Moten, director of community and economic development for the city.