Bank backs away from Detroit Target financing talks, but developer vows to complete i

**Airforceguy** · June-20-23, 04:49 PM

A local developer says a Chicago-based bank has backed out of financing talks on his proposed mixed-use development anchored by what would become Detroit's only Target Corp. store — but said he will see the deal through to completion with a new lender.

Jonathan Holtzman, who runs Farmington Hills-based City Club Apartments, said there was a term sheet — but not a loan commitment — from one of his long-time lenders, Associated Bank out of Chicago, but the bank backed away from the project.

"I'm not going to speak for Associated Bank," Holtzman said. [[I've asked Associated Bank to speak for itself in an email requesting comment on Tuesday morning.)

"I can only tell you Associated Bank is not involved in the project, not because of the city, Detroit, the project or the borrower or the deal."

Without speaking directly about Associated, Holtzman said stress in the broader commercial real estate market — particularly the office sector — and more macro issues related to the liquidity of many banks have caused difficulties for developers to secure construction financing.

He said people have been "sucking money out of banks" and instead investing in treasuries at 4% or 5% rates, causing liquidity issues for some banks.

"If a bank doesn't have liquidity and then has all these troubled office loans and you say, 'Hey, I want a loan for an apartment building,' they don't have the money," Holtzman said.

Adam Lutz, a commercial real estate finance expert who is president and CEO of Lutz Real Estate Investments based in Birmingham, said broadly that construction financing has substantially slowed due to banking, economic and real estate-related issues like the ones Holtzman described.

But, in an interview last week, Holtzman vowed that the City Club Apartments Midtown development would move forward with financing from a different lender. He said he is in conversations with both Flagstar Bank and Fifth/Third Bank.

"Could Midtown start at the end of the third quarter? Maybe. Could it start at the end of the fourth quarter? Maybe," Holtzman said. "We are 110% committed to build in Midtown. There isn't a chance that we're not building Midtown."
https://www.crainsdetroit.com/real-e...et-development

**gratiotfaced** · June-20-23, 07:26 PM

This project isn't happening, is it..

**Danny** · June-20-23, 08:49 PM

The bank worries about riff raffs, thugs and smash and grabbers robbing City Target.

**Danny** · June-20-23, 08:50 PM

Originally Posted by gratiotfaced

This project isn't happening, is it..

Nope! Until the developers get another investor that will risk their hard earned cash.

**stasu1213** · June-20-23, 09:04 PM

Originally Posted by Danny

The bank worries about riff raffs, thugs and smash and grabbers robbing City Target.

And crooked elected officials with their families and friends

**Richard** · June-21-23, 08:03 AM

Public perception is putting the commercial market in a tizzy.

I bought a new house in 1981,interest rate was 17% now interest rates hit 4% and people freak out and the sky is falling.

Pension funds,insurance company investments,retirement accounts etc. are all invested in commercial real estate.

Its the cycle though,lower interest rates to encourage investment but those loaning the money make less,they can only do it for so long before they need to Jack the rates back up.

It’s all pretty silly though,investment involves a level of risk and people anymore look for no risk investments which equals a needle in a haystack if they cannot find it they do not want to invest.

Retail theft is playing a massive role in all of that,Places like target are experiencing over 1 billion a year in losses and many retailers are pulling out of cities where it is an excepted practice $94.5 billion in theft in 2022.

I tried researching how Detroit as a city falls into that category when compared to other cities because how a city deals with it does have a risk factor in it all,but a lot of it is based on national trends,so they may have to find a local lender that is basing it on local numbers.

Target has stand alone locations all over the country,if they see that there is money to be made they will still develop but as the information was presented it was never a cast in stone firm commitment,if it was Target would be assuming the risk so finding a lender would not have been a problem.

Considering what Chicago is going through it is no surprise that a Chicago lender is a bit gun shy.

This seems more like a build to suit situation but without a firm commitment from Target .

**1953** · June-21-23, 08:25 AM

Here's a primer on why many banks are struggling now, in part due to commercial real estate holdings:

https://youtu.be/rpLkt48YrAs

**stasu1213** · June-21-23, 11:59 AM

Gilbert should flirt with Target to get them to open in one of his buildings as a City Target

**ShadowSoarer** · June-21-23, 01:32 PM

So basically by the time the Target mixed use development starts in Midtown Detroit, the Target mixed use development in Midtown St. Louis will be done even though both were announced roughly the same time.

**K-slice** · June-21-23, 02:58 PM

I read the whole story, kind of a nothingburger. So this bank out of Chicago backs out of the financing, it's not like there aren't other banks out there with the ability to lend on this.

It would be much more consequential had the developer, or anchor tenant [[Target) dropped out of the project. A stand-in for either of them would be much harder, if not impossible to find.

**stasu1213** · June-22-23, 06:37 AM

Originally Posted by K-slice

I read the whole story, kind of a nothingburger. So this bank out of Chicago backs out of the financing, it's not like there aren't other banks out there with the ability to lend on this.

It would be much more consequential had the developer, or anchor tenant [[Target) dropped out of the project. A stand-in for either of them would be much harder, if not impossible to find.

Not a nothingburger. One bank dropped the hot potato what other bank would want to pick it up. St Louis is more one the ball with it's mixed development anchored by a department store than Detroit is. It's becoming obvious that a mixed development anchored by major retail doesn't work well in Detroit. It was proposed for Jefferson near the downtown areaanchored by Rivertown Market but flopped. Wasn't the original plan for Staples was to anchor a mixed development as well but the deal fell through? This concept doest work well in Detroit

**K-slice** · June-22-23, 08:47 AM

Originally Posted by stasu1213

Not a nothingburger. One bank dropped the hot potato what other bank would want to pick it up. St Louis is more one the ball with it's mixed development anchored by a department store than Detroit is. It's becoming obvious that a mixed development anchored by major retail doesn't work well in Detroit. It was proposed for Jefferson near the downtown areaanchored by Rivertown Market but flopped. Wasn't the original plan for Staples was to anchor a mixed development as well but the deal fell through? This concept does't work well in Detroit

Banks change plans for any number of reasons, macro or micro economic trends, the individual banks liquidity, some change of internal leadership, as they haven't commented on their reasoning no one can say as to why they would back out.

Considering a new mixed use development anchored by major retail has yet to be built in the city what evidence are you basing this opinion on? I'll answer that for ya, none.

The Meijer project was scaled down as the anticipated rent for the residential no longer could support the increased construction costs the project was incurring, it had nothing to do with the project having a large retail component. More than likely, the necessity for significant underground parking made the original Meijer project unfeasible and had the option to build a parking garage been an option we would have seen a different outcome.

In any case, one incident doesn't indicate a trend.

**Richard** · June-22-23, 02:33 PM

Originally Posted by K-slice

I read the whole story, kind of a nothingburger. So this bank out of Chicago backs out of the financing, it's not like there aren't other banks out there with the ability to lend on this.

It would be much more consequential had the developer, or anchor tenant [[Target) dropped out of the project. A stand-in for either of them would be much harder, if not impossible to find.

They did not really back out they had a term sheet

A term sheet is a nonbinding agreement that shows the basic terms and conditions of an investment. The term sheet serves as a template and basis for more detailed, legally binding documents. Once the parties involved reach an agreement on the details laid out in the term sheet, a binding agreement or contract that conforms to the term sheet details is drawn up.

Term sheets are most often associated with start-ups. Entrepreneurs find that this document is crucial to attracting investors, such as venture capitalists [[VC) with capital to fund enterprises.

So you go to the bank and say - This is what I want to do,the bank writes up a term sheet and says if you meet all of the parameters then we will look at funding and if we will provide it.

RE: Meijer

They put a Publix in downtown Tampa,it is a full blown grocery store with a parking lot the size of a convenience store but yet it stays busy,Publix is not considered a discount grocer,a little cheap then Whole Foods but way better.

Not sure what the obsession with parking lots are,they never really dominated the downtowns of the past but yet they have replaced all of the buildings that made a city what it was.

**stasu1213** · June-23-23, 11:24 AM

Originally Posted by K-slice

Banks change plans for any number of reasons, macro or micro economic trends, the individual banks liquidity, some change of internal leadership, as they haven't commented on their reasoning no one can say as to why they would back out.

Considering a new mixed use development anchored by major retail has yet to be built in the city what evidence are you basing this opinion on? I'll answer that for ya, none.

The Meijer project was scaled down as the anticipated rent for the residential no longer could support the increased construction costs the project was incurring, it had nothing to do with the project having a large retail component. More than likely, the necessity for significant underground parking made the original Meijer project unfeasible and had the option to build a parking garage been an option we would have seen a different outcome.

In any case, one incident doesn't indicate a trend.

Maybe a reason why a mixed use development anchored by a major retail store hasn't been built before in Detroit is because what is currently happening. A chain retail have to wait a few years to open due to the development that the retail designed to share basement parking with can't get itself together. Why couldn't Target be a building standing alone such as Whole foods or Meijers? I don't shop at Target much but it would be great to have along the Woodward corridor that provides basic items for those not only who live in the downtown midtown area but the areas that surround downtown midtown such as Corktown, Boston Edison, Lafayette Park, and Woodbridge areas. Go figure

**gratiotfaced** · June-23-23, 01:06 PM

My understanding of this project is that the Target and two residential towers are all separate structures. I find it odd that they can't or won't just build this out in phases. Start with the single-story Target, since they've already signed a deal, then build the residential as financing comes together. This all-or-nothing approach seems extremely risky and liable to fall apart.

**K-slice** · June-23-23, 02:47 PM

Originally Posted by gratiotfaced

My understanding of this project is that the Target and two residential towers are all separate structures. I find it odd that they can't or won't just build this out in phases. Start with the single-story Target, since they've already signed a deal, then build the residential as financing comes together. This all-or-nothing approach seems extremely risky and liable to fall apart.

City Club is strictly a residential developer, if the apartments don't come with it, none of it will happen. To Holtzman, Target is just the cherry on top of this project's residential sundae.

**stasu1213** · June-23-23, 07:08 PM

Originally Posted by K-slice

City Club is strictly a residential developer, if the apartments don't come with it, none of it will happen. To Holtzman, Target is just the cherry on top of this project's residential sundae.

Who decided to connect Holtzman development with the Target store in the first place?

**Hypestyles** · June-24-23, 05:31 PM

nice idea while it lasted. hope positive stuff happens in that area soon, beyond the vainglorious press releases.

**Richard** · June-24-23, 09:22 PM

Originally Posted by stasu1213

Who decided to connect Holtzman development with the Target store in the first place?

They only release details that suit.

If you own commercial property you can do a build to lease,where you build a building specifically for that tenant,that tenant signs the lease 20-30 years,you take that lease agreement to the bank,the bank loans you the money to build it.