A new corps of landlords is scooping up Eastern Market property and rapidly changing the real estate landscape for the food district east of downtown Detroit.
In the last 18 months or so, a handful of buyers have purchased more than 20 buildings totaling nearly a half-million square feet with the potential for well north of $100 million in investment.
But those buyers are cut from a different cloth than many of the Eastern Market property owners of old.
This crop is laden with developers, economic development professionals and out-of-state and foreign investors looking to cash in on a hot enclave where food and funkiness, foot traffic and freshness, reign supreme and where Detroit's billionaires haven't planted their imposing flags.
Yet historically, the street-level business operators in Eastern Market owned their own properties, said Robert Heide, who up until about three years ago had substantial real estate holdings in the district before cashing out and "semi-retiring."
"Most of the business owners there were building owners themselves," he said.
Santemp Co. is out, having sold its six-building, 110,000-square-foot property portfolio to New York City-based ASH NYC, which redeveloped the Wurlitzer Building into the swank Siren Hotel. The company plans a mixed-use development that's still in the early stages.
As is Bert Dearing, although his popular Bert's Warehouse, 2727-2739 Russell St., remains in operation as a tenant of Sanford Nelson's Firm Real Estate LLC.
Busy Bee Hardware sold its approximately 20,000 square feet to developer Roger Basmajian's Basco of Michigan Inc., who plans a $6 million redevelopment. Other long-term property owners like Rocky Investment Co. have also exited the market.
With smaller, perhaps less liquid landlords comes deferred maintenance, said Dan Carmody, president of the Eastern Market Corp. Deeper wallets should bring a fresh round of building improvements, he said.
"We saw this trend coming," Carmody said. "I call it a tsunami or tidal wave of investment that's needed to update many of the buildings in the district ... To have a future, these buildings need a large infusion of cash."
A ‘seven-day location'
Among the buildings on tap for redevelopment: the former Detroit Water and Sewerage Department building that the city abandoned two decades ago on the north edge of the district on Riopelle Street next door to Roma Cafe.
It's windowless, sprawling, covered in graffiti.
Enter George Jackson's Ventra LLC and Ottawa-based Halcor Group, which plan a $20 million to $22 million redevelopment of the 105,000-square-foot building into the Riopelle Market, which would have a mix of food-centered space like restaurants, accelerators and other uses, as well as office space.
It's that mix that Jackson, the former head of the Detroit Economic Growth Corp., said would help make Eastern Market an even busier destination more regularly.
"Eastern Market should be a seven-day location, not just a weekend location," Jackson said.
3500 Riopelle St., the former Detroit Water and Sewerage Department building that the city abandoned two decades ago.
He added that the joint venture has talked with both the Nelsons and the ASH NYC team about their efforts.
"They are all a good fit for what we are doing and also the direction that the Eastern Market Corp. wants to go in," Jackson said. "Everything so far is compatible."
Grant Greschuk, director of Halcor, said a construction loan and other types of subordinated debt is expected to finance the project.
The joint venture has hired Birmingham-based McIntosh Poris Associates and Detroit-based Centric Design as architects on the Riopelle Market project. The Southfield office of Colliers International Inc. has been hired to lease the space to tenants.
Halcor is also working on a redevelopment of the former WJBK TV building in the New Center area into at least 150 residences.
Rent increase worries
Some existing businesses, Carmody said, have expressed concerns about rent increases as the new landlord crop pours money into improving the older buildings. Part of that concern arises because the space has been comparatively inexpensive for decades.
"The previous landlords came up in an age where having a warm body and somebody paying any kind of rent was an advantage over having vacant space," he said.
But for example, Riopelle Market office rents would be on par with what's seen in some of the renovated spaces in the central business district.
It would have to start in the mid $20s per square foot for the project to be economically viable, said Peter McGrath, senior associate for Colliers International. And Drew Chorney, senior vice president and director of retail for Colliers, said the retail rent "sweet spot" would be the "high teens to low $20s" per square foot.
"Each deal is going to be unique and the economics are going to reflect the credit of the user," Chorney said.
Nelson has said he plans on carving out affordable space for artists and food users as his overall vision for his portfolio progresses.
Despite the range of plans, the new cadre of property owners in the district all say Eastern Market needs to stay true to its roots as an area that sells, promotes and celebrates food and the arts.
"Eastern Market Corp. has done a fantastic job of maintaining the area's longevity," Greschuk said. "In most cities, this would have disappeared long ago."
Nelson, son of serial entrepreneur Linden Nelson, said there will continue to be a mix of landlords and owner/operators in Eastern Market.
"There are still a lot of owner/occupiers. You've got people like The Platform, the ASH group, Firm, George Jackson and some others that aren't the traditional Eastern Market owners that have a food business in the building they own, but you still have some of those," he said.
"You're going to continue to have that mix, and that's a good thing."