More good news for reviving downtown Detroit and more kudos for the 'Dan Gilbert effect'! One Kennedy Square, the green glass building on the west side of Campus Martius Park, was refinanced for $27.3 million, making the value of the loan $112 per square foot.

This is kind of wonky stuff, but news like this is actually huge and even more significant in that it was not a locally financed.



This article was by Nancy Kaffer reported in Crain's here. Unfortunately that is locked to subscribers only for now, hence the following lengthy quotes which summarize the story.

"That's a big fricking number," said Dennis Bernard, president of Southfield-based Bernard Financial Group, which hand-led the refinancing for Southfield-based Redico LLC, owner of One Kennedy. "I'll close $500 million in loans this year, but this is huge."

The deal is far from the rock bottom sales of recent history such as the $5 million sale of the Penobscot Building representing a price of $5 per square foot.

And the One Kennedy Square mortgage, issued by New York-based J.P. Morgan Chase, is non-recourse -- in this type of mortgage, only the buildings are used as collateral, and borrowers aren't on the hook if the loan goes into default.
Bernard

That, too, is a positive sign, Bernard said.

"They're relying on the value of the real estate and the sustainability of the value of the real estate," he said. "We're not aware of any non-recourse financing in the city of Detroit since 2007. ... [[Lenders) now believe the value of One Kennedy will sustain itself going forward. They're not looking for borrowers to sustain the loan."
Bernard said: "New York now thinks Detroit is worth putting money into."

Watchowski acknowledged that the deal would have been difficult in recent years.
Watchowski

"We were happy with the proceeds," Watchowski said. "We had targeted a loan amount based on our mortgage debt and some mezzanine debt."

The mortgage was through a bank, but the mezzanine debt was from Invest Detroit and the city's Police and Fire Retirement System. All lenders have been repaid, he said.

Redico decided to refinance now, Watchowski said, because "the debt was coming due, but I will also attribute the timing to the positive momentum in the city created in large part by Dan Gilbert ... and what Quicken is doing in downtown in terms of occupying a good part of the downtown marketplace."

"Gilbert is helping a lot in Detroit," Kernen said. "The lenders basically redlined Michigan through the downturn. To see someone like Dan Gilbert make that big of an investment in Detroit gives them some confidence in the market that things are getting better."

Moving employees into the buildings "gives the ability, with having new leases signed, it gives them price points in the markets," Kernen said. "Lenders on other buildings can judge where their leases stand."

The One Kennedy Square refinancing should impact other deals, said A.J. Weiner, executive vice president and national director of office leasing for Jones Lang LaSalle.

"You can't ignore the dramatic change in downtown Detroit," he said. "Dan Gilbert, Blue Cross, General Motors committing to the Renaissance Center -- it makes for a much more appealing underwriting.

"The risk piece is much lower because you have all these owner-occupied facilities and a tenant base that's growing... optimism that if I buy this building and put money into it and fill it up, there will be a debt market that's responsive. It helps overall the cause of the rebirth of downtown."