Book Buiding to Get Apartments

[royce]

According to Austin Black II, a real estate agent who blogs at www.urbanliving.com, Westin Book Cadillac developer, John Ferchill plans to develop 300 apartments at the Book Building. Anyone else hear about this?

[royce]

Sorry. The correct website is www.urbanlivingupdate.com.

[davewindsor]

According to Austin Black II, a real estate agent who blogs at www.urbanliving.com, Westin Book Cadillac developer, John Ferchill plans to develop 300 apartments at the Book Building. Anyone else hear about this?

Leland_Palmer mentioned he heard of it from Crain's Detroit in this thread http://www.detroityes.com/mb/showthread.php?t=2045 $87 million in renos, but he only cut and paste a part of the article.

[Rocko]

I did a quick Google news search on "Book building Ferchill" and it came back with the Crain's Article. Seems to be more of a story about why the Lafayette won't work, in Ferchill's eyes, but it does give a few small clues about this Book Building project. If the apartments were reasonable... I'd live there!

Renewing the Book: Tower passes John Ferchill's viability test

By Nancy Kaffer

If developer John Ferchill can't save a historic building in Detroit, it's not salvageable.

That's the conclusion Detroit City Council President Ken Cockrel Jr. drew when voting to deny a historic designation for Detroit's Lafayette Building, a decaying structure that Ferchill, chairman and CEO of Cleveland-based The Ferchill Group, had deemed too expensive to save.

Now Ferchill, whose renovation of the iconic Westin Book-Cadillac has rapidly become Motor City legend, is turning his hand to a new project — an $87 million renovation of the nearby Book Tower.

Constructed during the 1910s and 1920s by the Book brothers — J.B., Frank and Herbert — the building became vacant earlier this year.

New York-based investment group The Pagan Organization purchased the Book Tower and the Book Building in 2007, but Northeast Commercial Services Corp., created to handle the renovation of the Book Tower, filed for Chapter 11 bankruptcy protection later that year.

Ferchill wouldn't discuss the details of his project, but original plans for the renovation called for mixed-use residential, office and retail space.

Ferchill says the Book Tower is one of the most viable historic structures in Detroit's downtown — and that's what makes this project different from other beloved historic buildings.

“I'll be the first to admit to you that the city of Detroit probably demolishes more than they have to, but the city of Detroit is a huge place,� Ferchill told Crain's. “You can't fill all these buildings, so you have to pick and choose the ones that make more sense.�

The Detroit Downtown Development Authority and the Detroit Economic Growth Corp. have drawn fire over the decision to demolish storied structures such as Tiger Stadium and the Lafayette Building. But Ferchill said that all too often the financial case for restoration just isn't there.

“With every trick we know, there was probably a $7 million to $8 million gap on [[the Lafayette), and who's going to make that up?� he said.

And those projections, he said, were made before the credit market crash.

An easement sale, projected in the Lafayette estimate at $5.3 million, couldn't happen today, Ferchill said. An easement is a portion of land that can be sold to another user. That would leave the gap closer to $11 million.

Ferchill said his team spent six to nine months researching a Lafayette renovation in 2007 and couldn't make the numbers work due to the deterioration of the structure.

When the Book-Cadillac's fate was under review, “[[the DEGC) sent me over the engineering report, and I looked it over and said, "They're wrong, you should hire this engineer to do an analysis,' and they did and that analysis came back and said this building is structurally sound,� he said.

“The same engineer looked at the Lafayette and said, "You can make it work, but you're going to have to shore up the structure.' Then we knew we couldn't make it happen.�

Profits from the building wouldn't have supported the costly restoration.

“You have to have a plan, and after you get [[the renovation complete), what are you going to do? What are you realistically going to do? That, to me, is where the rubber meets the road,� Ferchill said.

“That's why we're working on the Book Tower, because we've got the sources figured out. There's no gap.�

The Book Tower renovation is part of a Ferchill Group-backed effort to redevelop a downtown strip centered along Washington Boulevard.

“This neighborhood is probably the most fixable of anything we've seen,� he said.

Nancy Kaffer: [[313) 446-0412, nkaffer@crain.com.

[spiritofdetroit]

This would be huge....Also would be a sign that the Book Cadillac can't be doing that bad, even given the fact that Ferchill himself didn't put up a lot of money.

[buildingsofdetroit]

This would be huge....Also would be a sign that the Book Cadillac can't be doing that bad, even given the fact that Ferchill himself didn't put up a lot of money.

Either that, or it says Ferchill is willing to spend more money to not was the money he already put into the B-C. If he can save the Book Tower, the loss of the Lafayette would be easier to swallow. No bout a doubt it. Capitol Park still needs a lot of help, though.
I found the first part of this quote shocking to be coming from his mouth: “I'll be the first to admit to you that the city of Detroit probably demolishes more than they have to, but the city of Detroit is a huge place,� Ferchill told Crain's. “You can't fill all these buildings, so you have to pick and choose the ones that make more sense.�

[staticstate]

that's great news! it will probably be renovated before Broderick even gets started.

[Detroit500]

So So Pleased to hear this! Not sure how viable it is, but it seems like Ferchill is trying to make Washington Square a little "elite" section of the Downtown area. Your luxury office, residence, and amenities all in one area. Let's see if it works.

The question is, why aren't our major dailies, the Free Press and News covering this? Oh wait, they're too busy filling their pages with syndicated Op-Ed pieces or Associated Press articles.

[MIRepublic]

It's good he's smart enough to go with apartments, this time. Too many developers have tried to push upscale condos trying to make quick money knowing that they'd have to move hell to sell them. It's time to get people in downtown on the rental front and allow them to move up the ladder as downtown improves because they are their in the first place.

I've never doubted apartments could work in the Tower, and I'm glad to see he's proposing apartments.

[Lorax]

What will need to be encouraged as well if so many new residences are coming online, is the addition of a major grocery store chain opening in the area.

With the economic downturn, here in Miami, plans have been scrubbed to open a new Whole Foods in downtown, as well as a Fresh Market, which would have served the thousands of condos and apartments that were due to open in the last few years.

If a major chain refuses to see the potential there, then I would encourage Detroit to court one or more smaller grocery or specialty stores, giving tax breaks to mom & pop businesses as incentive to run a business downtown.

Not advocating for junk food stores like the one that opened recently on WB with inch-thick plexi separating the customers from the owner, but a deli, butcher, bread shop, green grocer, etc.

If such a great number of apartments are going online in the future, we most likely will need to support smaller businesses, those that fall under the radar of the SBA, which should be renamed the Big Businesss Administration, since I don't know of one business that already isn't cranking 5 million a year gross or more as a minium that qualifies for SBA assistance.

I know of dozens of start up companies over the years that could never benefit from SBA loans since they weren't already wealthy enough to qualify. Hopefully the business incubator in Detroit will have the effect needed to fill the void in business lending. Micro lending is another option for bringing young entrepreneurs into the business world.

In any event, cheers to the Ferchill group for considering this, and my hopes of a Book Tower complex existing in it's original condition with it's architecture intact may come to fruition. Certainly my favorite of all of downtown's buildings.

[Danny]

YAY!

I thought the historic Book Tower is gone for good. Now its going be transformed into a classic Park Ave. condos and apts. Detroit is where the action is. Now let's go save the Lafayette Building.

[rb336]

Ferchill has a first-rate organization, this is the best news for preservationists in a long time. He does not invest lightly, and this is good news with no dark lining like so many like to see.

Anyone know if Marous Bros. will run the restoration project like they did with the BC?

[3WC]

R8RBOB asks is I would like to s"hare my insight why the Book Bulding would never be renovated." Sure, for whatever it's worth.

I'm an old guy. I have been involved in various businesses, including the real estate business, for many years. I made a lot of money at it [[by being very carefull) and was involved for many years in downtown Detroit real estate, where I still have interests in a couple of properties.

The Book Building has been a financial basket case for many , many years, at least 40. It has years of deferred maintenance. I [[and others) could have bought the building from Travelers Ins. Co. in the '80's for $300,000. Everyone including me passed, except John Lambrecht. I though John made a terrible financial decision and I was correct. [[I told Travelers it would have to pay me a great deal of money to take the building off its hands. I'm very glad they passed on that idea.) The book Building has not been an asset to anyone for 40 years; it has been a liability.

Prior owners have screwed DTE out of millions [[yes, millions) in unpaid electricity. They got way behind in their electric bills, entered into payment agreements which they never kept, and when DTE tried to shut off electricity the politicians [[starting, probably, with Colman Young) "talked DTE out of it.") Then the building was usually sold again and the cycle started over, You all have subsidized the Book Building through your inflated electric bills, for many years. A close friend and occasional; associate took DTE to court to compel DTE to terminate electricityfor non-payment [[so my friend, who always paid his bills promptly, wouldn't have to subsidize the the Book, a competitor. The MPSC, a polictical body which serves the political party in power, refused to enforce the Statute governing electricity providers, and the appellate courts up to the MI Su Ct, rubber stamped the MPSC decision.

Ferchill may do his homework, but it remains to be seen whether the BC will ever be financially viable. I've reviewed the financing for that deal, and despite a pretty good background in, and understanding of real estate financing, it took me quite a while to understand how that deal was put together. It's the most complicated deal I've examimed. There are 17 layers of financing, inlcuding tax credits [[you and I pay for those), social money put up by the City pension funds, who will probably never get their money back, and a smattering of private equity, which may end up with the pieces. I don't think it's a financially viable deal, and never have. Part of the problem, obviously, is the economy.

I just think that the financiang that was available for the BC does not exist any longer. And if Ferchill thinks he can do that job for $87 million, he is on drugs. It would cost 2 or 3 times that. I know folks who have looked into coming up with a plan too capitalize on that building, and as I said before, it's just not going to happen. The economics don't exist under any scenario.

Somebody up there thinks that a downtown super market will be a great step in saving the City. Well, as I recall, a couple of people started one 2 or 3 years ago, to great fanfare and high expectations, and I don't think it l;sted a year. They just had no ides what they were doing. That deal was covered extensively in the old forum. What the poster above doesn't realize is that the first rule of business is "find a need and fill it."

Large supermarket chains have legions of people trying to do just that. Site selection guys. Demographers. Supplier advisors. The list is long. It's pretty clear that the poeople who know what they're doing do not feel there is a need in the city for new supermarket, or if there is evidence of such a need, it can't be satisfied economically. Otherwise you'd see several chains trying to be the first to locate here.

I'm not saying I don't want to see the BB renovated. I would, since I have an ownership in property relatively close by, but I just don't see any scenario in the next few years [[or, ever) that would justify it. [[Unless, of course, Obama just wants to waste stimulous money for that purpose.)

[R8RBOB]

R8RBOB asks is I would like to s"hare my insight why the Book Bulding would never be renovated." Sure, for whatever it's worth.

I'm an old guy. I have been involved in various businesses, including the real estate business, for many years. I made a lot of money at it [[by being very carefull) and was involved for many years in downtown Detroit real estate, where I still have interests in a couple of properties.

The Book Building has been a financial basket case for many , many years, at least 40. It has years of deferred maintenance. I [[and others) could have bought the building from Travelers Ins. Co. in the '80's for $300,000. Everyone including me passed, except John Lambrecht. I though John made a terrible financial decision and I was correct. [[I told Travelers it would have to pay me a great deal of money to take the building off its hands. I'm very glad they passed on that idea.) The book Building has not been an asset to anyone for 40 years; it has been a liability.

Prior owners have screwed DTE out of millions [[yes, millions) in unpaid electricity. They got way behind in their electric bills, entered into payment agreements which they never kept, and when DTE tried to shut off electricity the politicians [[starting, probably, with Colman Young) "talked DTE out of it.") Then the building was usually sold again and the cycle started over, You all have subsidized the Book Building through your inflated electric bills, for many years. A close friend and occasional; associate took DTE to court to compel DTE to terminate electricityfor non-payment [[so my friend, who always paid his bills promptly, wouldn't have to subsidize the the Book, a competitor. The MPSC, a polictical body which serves the political party in power, refused to enforce the Statute governing electricity providers, and the appellate courts up to the MI Su Ct, rubber stamped the MPSC decision.

Ferchill may do his homework, but it remains to be seen whether the BC will ever be financially viable. I've reviewed the financing for that deal, and despite a pretty good background in, and understanding of real estate financing, it took me quite a while to understand how that deal was put together. It's the most complicated deal I've examimed. There are 17 layers of financing, inlcuding tax credits [[you and I pay for those), social money put up by the City pension funds, who will probably never get their money back, and a smattering of private equity, which may end up with the pieces. I don't think it's a financially viable deal, and never have. Part of the problem, obviously, is the economy.

I just think that the financiang that was available for the BC does not exist any longer. And if Ferchill thinks he can do that job for $87 million, he is on drugs. It would cost 2 or 3 times that. I know folks who have looked into coming up with a plan too capitalize on that building, and as I said before, it's just not going to happen. The economics don't exist under any scenario.

Somebody up there thinks that a downtown super market will be a great step in saving the City. Well, as I recall, a couple of people started one 2 or 3 years ago, to great fanfare and high expectations, and I don't think it l;sted a year. They just had no ides what they were doing. That deal was covered extensively in the old forum. What the poster above doesn't realize is that the first rule of business is "find a need and fill it."

Large supermarket chains have legions of people trying to do just that. Site selection guys. Demographers. Supplier advisors. The list is long. It's pretty clear that the poeople who know what they're doing do not feel there is a need in the city for new supermarket, or if there is evidence of such a need, it can't be satisfied economically. Otherwise you'd see several chains trying to be the first to locate here.

I'm not saying I don't want to see the BB renovated. I would, since I have an ownership in property relatively close by, but I just don't see any scenario in the next few years [[or, ever) that would justify it. [[Unless, of course, Obama just wants to waste stimulous money for that purpose.)

3WC, thank you for that. I suppose we need for someone to explain it from a a financial point of view.

I was going back and forth with a Lorax in reference to the old Cass Tech building. http://www.detroityes.com/mb/showthr...?t=2032&page=2

I was accused of wanting the building torn down for a empty lot ignoring the historic aspect of the building. I was pointing out that it take money, a whole lot of money to renovate and restore a building. Lorax believes you can "mothball" a building for future use ignorning the fact that take money to maintain a empty building. Money you can't afford on an empty building. I used to go into the Book Bldg. for work. My aunt lived across the street from the Book and I liked the historic nature of the building but the building has had it problems for years. I don't want to call it a dump but it was a dump.

You being an old guy, you know, YOU KNOW that if it cheaper to build anew rather than renovate you and everyone who is watching the books is going to take the former and not the latter. No one is going to move in an old ass building when they can get into something new.

As I explained before, I want Detroit to keep its ancient buildings. I want them restored to their previous glory but it will always come down to one thing: $$$$$$ This city does not have the backers to put the money down needed to restore those buildings. The city is paralyzed because it should not have to be a landlord to multiple structures throughtout the city empty but it is the landlord and there are no buyers.

Thank you 3WC for responding to my question. It was an honest assessment to a reality we all know but don't want to accept.

[g-dub]

It's good he's smart enough to go with apartments, this time. Too many developers have tried to push upscale condos trying to make quick money knowing that they'd have to move hell to sell them. It's time to get people in downtown on the rental front and allow them to move up the ladder as downtown improves because they are their in the first place.

I've never doubted apartments could work in the Tower, and I'm glad to see he's proposing apartments.

You're right. It's happening a lot in Chicago. Developers were drunk on the profits of condo developments a few years back, and by the time they got midway through some of their unfinished projects [[in the south Loop mainly) the economy tanked. And, since so many of them leaped to feed at the real estate trough at the same time, there is a glut of unsold condos downtown. Now, one by one, their projects are going rental. Some of the rental rates are a bit steep, but there tends to be at least a few nice amenities with a high rise residential building, and for the right resident it makes financial sense.

I know the Grinnell Lofts did the same thing not long ago, and hopefully it has turned out to be a good move on their part. The Book is a great building, and if the rents are reasonable they'll have enough volume to be able to keep that building alive and kicking with tenants. There should be more Ferchills with some vision doing their homework. It's an more of an urban generation among younger adults, and they're not often ready to be owners in their 20s or 30s, so as far as the urban living market goes, renting is where it's at. Condo ownership is still something of a novelty in Detroit, but there will always be a healthy market for renters.

[Patrick]

So, give this forum a ballpark figure as to how much it would cost to rehab the Book Tower. Can they get their money out of it knowing that Detroit's economy will be in the toilet for years to come?

[dcmorrison12]

So, give this forum a ballpark figure as to how much it would cost to rehab the Book Tower. Can they get their money out of it knowing that Detroit's economy will be in the toilet for years to come?

News flash, it won't be just detroit - the whole state

[Gistok]

Great insight all...

But I do have one question... it was in response to 3WC's lengthy detailed response on why he doesn't believe that the Book will be restored...

I understand that Historic Tax Credits are literally public money. That goes for federal and state Historic Tax Credits. But that begs the question... if Detroit doesn't take advantage of the available pots of tax credit monies, then others will. I mean if we don't restore another historic building in Detroit, then that will make more federal money available for other cities to restore their old buildings.

Ditto for state Historic Tax Credit money. If Detroit doesn't use it's sizeable fair share, the that will make more available for other towns such as Lansing, Grand Rapids, Flint, Saginaw, Ann Arbor, etc...

Because Detroit has such a large number of surviving historic structures, isn't it fair that we should maximize our tax credit potential in helping to fix up large sections of downtown?

Like highway transportation dollars... either we use our share... or someone else will. Am I right here?

Either we pay for these credits in our own backyard.... or we're going to pay anyway in someone elses backyard.

If this logic is correct, I know which choice I'd rather make....

[artds]

Great news. Just getting the exterior of that building cleaned up will make the skyline a lot more pleasant to look at.

[Lorax]

Imagine the Book Tower with it's facade cleaned to a gleaming buff color, much as the Book Cadillac looks today, with it's lights on, and the tower illuminated at night.

Back when it was built, the giant stone urns you see visible at the base of the roofline uplight the tower at night. Louis Kamper definitely had a flair for the dramatic, and what endears this building to me above most others is the apparent learning curve Kamper was going through at the time he was commissioned to design it.

It's been noted that he was embarrased at the sheer vertical nature of skyscrapers, and felt the need to embellish it with heavy duty stone carving, and top it with a mansard roof. His classical training was bound and determined to assert itself on what should have been a much more streamlined structure.

No doubt his inspiration were the baroque palaces of Dresden and Vienna, and in America it is truly unique, since it's most similar sister, the Singer Building in New York, was demolished in the 1960's. We are lucky to have the Book Tower still standing, and it needs a little respect now.

[PQZ]

Great insight all...

...But that begs the question... if Detroit doesn't take advantage of the available pots of tax credit monies, then others will. I mean if we don't restore another historic building in Detroit, then that will make more federal money available for other cities to restore their old buildings.

Ditto for state Historic Tax Credit money. If Detroit doesn't use it's sizeable fair share, the that will make more available for other towns such as Lansing, Grand Rapids, Flint, Saginaw, Ann Arbor, etc...

Either we pay for these credits in our own backyard.... or we're going to pay anyway in someone elses backyard....

If this logic is correct, I know which choice I'd rather make....

Unbelievable.

Your logic is not at all correct.

There is no "pot of money" for federal or state historic tax credits and there is no annual cap. If a project is completed in another city or another state, it has absolutely no bearing on whether there are sufficient tax credits available for other projects.

For someone who is such a strong advocate for historic preservation and who is so strident on this forum to have such a basic misunderstanding of tax credits is...well, you should be very embarassed.

[PQZ]

IIRC, the Book Tower is distinct from the Book Building. It is my understanding that Ferchill is looking at the Building and not the Tower.

Doing math backwards an $87,000,000 renovation at $125 a foot [[just about the cost of the Kales per foot) clocks it in at 696,000 square feet for just the Book Building. That doesn't seem right for the Building and the Tower - [which is listed as 171,000 square feet] . Cranking it up to $200 a foot [slightly lower than BC per foot pricing] takes the entire complex to 435,000 square feet which seems more likely. Going from that assumption, and please if any building nerds have accurate square footage counts for the Building and the Tower separately, please post them...we can make some very broad assumptions.

The Book Cadillac with its significant facade damage and severe distress clocked in at $180 million for north of 700,000 square feet [[the orginal building plus the addition). Its hard for me to believe a smaller building in much better condition would cost $180 million to $270 million. The $87 million probably right in the ball park +/- 15%. Its certainly not off by a factor of 2 or 3. What isn't discussed is if that figure includes a parking deck. If this deal goes forward, look for the DDA to footing the bill on a deck to support it.

The cost side I am not worried about as being artificially low. The revenue side would have to be considered nothing but ridiculously optimistic. It would need to be rental and is there market to absorb that many more units? Kales was pulling about $1.20 per foot per month in rent at a 87-90% occupancy pre-crash. I think its hard to make those numbers work well enough to service debt and equity returns, especially in a very very tight credit market. Presume a 50% LTV for now, thats a looooong way to go to find $43.5 million in equity and tax credits.

[Doma]

I'm going to air on the side of blind faith here. I don't know if anybody has ever seen a graph or chart of the financing deal for the Book Cadillac.....It WAS probably the most complicated real estate financing deal in history.

If it's going to happen, Ferchill is the guy who is going to make it happen. If Ferchill says it is going to happen, well it's probably going to happen.

$135-$200 ft is in the range of what it costs to build high end homes, maybe higher. Should be able to make the building top notch with that kind of dough.

Reading this article also give me some closure about the Lafayette coming down, it doesn't appear to be justifiable.

IIRC, the Book Tower is distinct from the Book Building. It is my understanding that Ferchill is looking at the Building and not the Tower.

Doing math backwards an $87,000,000 renovation at $125 a foot [[just about the cost of the Kales per foot) clocks it in at 696,000 square feet for just the Book Building. That doesn't seem right for the Building and the Tower - [which is listed as 171,000 square feet] . Cranking it up to $200 a foot [slightly lower than BC per foot pricing] takes the entire complex to 435,000 square feet which seems more likely. Going from that assumption, and please if any building nerds have accurate square footage counts for the Building and the Tower separately, please post them...we can make some very broad assumptions.

The Book Cadillac with its significant facade damage and severe distress clocked in at $180 million for north of 700,000 square feet [[the orginal building plus the addition). Its hard for me to believe a smaller building in much better condition would cost $180 million to $270 million. The $87 million probably right in the ball park +/- 15%. Its certainly not off by a factor of 2 or 3. What isn't discussed is if that figure includes a parking deck. If this deal goes forward, look for the DDA to footing the bill on a deck to support it.

The cost side I am not worried about as being artificially low. The revenue side would have to be considered nothing but ridiculously optimistic. It would need to be rental and is there market to absorb that many more units? Kales was pulling about $1.20 per foot per month in rent at a 87-90% occupancy pre-crash. I think its hard to make those numbers work well enough to service debt and equity returns, especially in a very very tight credit market. Presume a 50% LTV for now, thats a looooong way to go to find $43.5 million in equity and tax credits.

[MIRepublic]

The Tower is peanuts, in terms of constructing financing, compared to the deal for the Westin B-C.

[cman710]

I hope that Ferchill can pull everything together to accomplish this project. I think that Ferchill is probably looking at this in the long-term. Having an occupied Book Tower and Building increases the value of the Book-Cadillac area, and opens up further room for development. In that sense, I am happy to see that Ferchill appears to have an investment in the Washington Blvd. area.