Friday, June 12, 2009
Detroit gives loan break to ailing downtown businesses

Development agency allows hotel, others to skip principal payments

Louis Aguilar / The Detroit News

Detroit -- Times are so tough that seven upscale downtown businesses, including the Atheneum Hotel, Seldom Blues restaurant and Detroit's Breakfast House & Grill, are struggling to make their loan payments to a city-supported agency.
The businesses are part of Detroit's effort to revive its commercial heart, but it's the latest setback to big, pricey dreams.
To help them ride out the rough economy, the board of Detroit's Downtown Development Authority agreed Thursday to let them pay only the interest on their loans for 18 months.
The total amount of the loans isn't large -- $4.1 million -- but the statement is sobering. The seven downtown businesses, plus one in Dearborn, represent nearly half of the 19 businesses to which the DDA loaned money in recent years to help spark a downtown renaissance.
"The economic recession visited upon Michigan this past year has been economically challenging to most all businesses located in Detroit," the DDA's Todd Carmody said in a presentation to the board.
"Many recipients of DDA loans have been particularly harmed and have found it difficult to continue making their scheduled loan payments."
Ted Gatzaros, an owner of the Atheneum Hotel in the Greektown area, said "everybody, from what we can tell, has been pretty hard hit." The hotel's DDA loan balance is $3 million.
"Downtown occupancy rates have really dropped for months now," Gatzaros said. "We never missed a payment, but many other types of loans are now impossible to get and so whatever upgrades we do are our own money."
The board didn't approve the "interest-only" amendment to the Greektown hotel's loan Thursday, but intends to do so in two weeks. Gatzaros is on the board of the DDA, a branch of the quasi-public Detroit Economic Growth Corp., and the board couldn't vote on his loan agreement while he was in attendance. DDA funding comes from tax revenue generated by downtown businesses.
Downtown Detroit had seen vast improvements over the past decade -- including several new, upscale hotels -- but the global recession has deferred other development plans.
The Borders bookstore in the Compuware building closed last week. Dreams of dotting the downtown riverfront with ritzy condominiums, some that were to be priced over $1 million, have died or remain only on the drawing board. And the once-planned $150 million Cadillac Centre, a sprawling new retail building, never got past the initial planning stage.
The DDA gave Southern Hospitality Restaurant Group $600,000 to open Seldom Blues on the ground floor of the Renaissance Center, and the Breakfast House & Grill on a prime spot along Woodward Avenue.
Those restaurants were among the eight businesses that will be allowed to pay only the interest on their loans until Oct. 2010. The two owe a combined $484,000 on their DDA loans.
The development group also loaned Southern Hospitality $200,000 for the now-closed Grand City Grille, which opened inside the Fisher Building in the New Center area in 2006.
Frank Taylor, one of the founders of Southern Hospitality, continues to receive city funding for new ventures in other parts of Detroit's downtown. He's an investor in the Detroit Fish Market, which opened in the Harmonie Park area last year.
Several of the outstanding loans that won reprieves on their principal payments are relatively small, such as one for $16,000 to Opus to Go catering.
Vicente's Cuban Cuisine also got a break on a $190,000 DDA loan balance.
"We're still serving about 1,200 [[customers) a week," said owner Vicente Vazquez.
But he said customers are spending less, and the icy credit market makes it tough for his restaurant to borrow to upgrade its equipment and property.
"It's not so much downtown business has completely died," Vazquez said. "It's more like at a standstill. But the costs keep going and going."
He said paying interest only on his loan instead of the principal lowers his monthly payment from $3,500 to $650.
"I wish I knew that in 18 months things will be better, but I remind myself Benjamin Franklin and Thomas Jefferson declared bankruptcy. But I chased my dream of doing business downtown and I still believe in that," Vazquez said.
Other downtown businesses getting a DDA loan break are Woodhouse Day Spa, whose loan balance is $175,000; and Lola's, a Harmonie Park restaurant whose balance is $86,000. The DDA also amended its loan with the Good Bread Company of Michigan, a major supplier to Detroit businesses. It is headquartered in Dearborn, and has a loan balance of $143,000.
laguilar@detnews.com [[313) 222-2760


This is another example of how the DEGC stays in favor. Everyone they're helping writes campaign checks and/or is connected with people at Detroit Renaissance, The Mayor or City Council.