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November 06, 2011 8:00 PM

Persistence puts Gateway Marketplace on path for turnaround

By Daniel Duggan

In the summer of 2008, the retail project near Eight Mile and Woodward Avenue was in a free fall after losing its anchor tenant and developer. After being in the works, at that point, for eight years, city leaders and people involved with the Gateway Marketplace defended it in the face of skepticism that it would fail. It's in a dramatically different position now. Grand Rapids-based Meijer Inc. will fill 215,000 square feet, and there are commitments from retailers for 60 percent of the remaining 145,000 square feet in the center, plus a fast food restaurant set for the parking lot. The $28.6 million construction loan is expected to be available by January from the city of Detroit's General Retirement System, and $10.75 million in tax incentives was approved last week. With that funding, construction of the walls and steel beams is set for next summer. Still, the development team has to confront credibility issues of the past, said Scott McCarthy, vice president of retail development at Southfield-based Redico LLC, the developer that has been overseeing the project for the past year. "We're getting traction now, but the leasing has been a challenge because of the credibility issues," said McCarthy. "This project has been around for so long there were questions of whether it will happen. Now there's certainty. " And with each lease, the momentum grows, he said. Marshalls, the Framingham, Mass.-based discounter, has signed a lease for 28,000 square feet; K&G Superstores, a division of Houston-based Men's Wearhouse Inc., will lease 20,000 square feet; and Oakbrook, Il-based McDonald's Corp. will build a restaurant in the parking lot. Other tenants have either not signed leases or are not ready to announce their involvement, he said. Early momentum came from Chicago-based developer General Growth Properties, which was set to develop and own the project. The company ended its relationship with the project in July 2008. Then, that same summer, Plano, Texas-based J.C. Penney dropped out of the project. But the ownership group stuck with the project through those times. The project is owned by Detroit Gateway Park Outlet Mall LLC, a group of investors that includes developer Bernie Schrott,

Dykema Gossett PLLC attorney Elliot Hall, former Wayne County Commissioner Ricardo Soloman and Marvin Beatty, a former owner of Greektown Casino-Hotel. The late Bill Davidson was an investor as well, and his estate is currently an owner of the project. George Jackson, president of the Detroit Economic Growth Corp., said the marketing spark from Redico, combined with the original players in the project, got the project to the point it is today. "Redico fortified the original team, and now we have all the right pieces together," he said. Jackson said a crucial milestone in the lifecycle of the project was reached last week. The Detroit City Council approved a tax increment financing package Tuesday that will bring the project an estimated $10.75 million. The project also has received a Brownfield tax credit expected to bring $5.9 million. "This is going to send a message to other big box stores," Jackson said. "And it's putting Meijer in an advantageous position to be the first one in." A success story at Eight Mile and Woodward will help the ongoing development plan on the site of the old Redford High school, said Chris Brochert, a partner in Lormax Stern Detroit Development LLC, the group developing the site at Grand River Avenue and McNichols Road. The Redford project is close to securing approvals from the city of Detroit and will soon start a marketing and leasing effort. Meijer is reportedly also interested in that site but has yet to announce an involvement. But the two projects, nine miles away from each other, won't compete for tenants, he said, because "in retail, they are light years from each other." "Any new development in the city of Detroit that gets rid of blight and brings new commerce is positive," Brochert said. "And anything that's positive for Detroit is positive for the region." McCarthy said Gateway is nationally unique in being a pre-recession retail project that has survived where many projects have not come to fruition. "This project, in the larger scope, is a survivor," McCarthy said. "And that speaks to the fact that this project is desperately needed and there are retailers that want to do business here." Daniel Duggan: (313) 446-0414, dduggan@crain.com. Twitter: @d_duggan

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