Dan Gilbert’s real estate firm Bedrock is getting some help from the state to borrow up to $150 million more for its four big “Transformational” development projects in downtown Detroit.
Board members of the quasi-public Michigan Strategic Fund in Lansing on Tuesday, April 28, unanimously approved a request from Bedrock for the strategic fund to issue $150 million in tax-exempt “private activity bonds” on behalf of Bedrock.
Bedrock is to pay back the bond proceeds using future tax revenues that it collects over time from its previously approved $614 million “Transformational Brownfield” at the four project sites, including the Hudson’s Detroit development.
The Transformational Brownfield is a development incentive that allows developers of large projects to capture various streams of state and local taxes generated at the new development sites over 20 to 30 years.
The $150 million in bonds would be issued by the strategic fund and presumably purchased by private institutional investors. The bonds would be tax-free for those who buy them, and therefore carry lower interest rates than ordinary bonds, which would be good for Bedrock.
Bedrock has indicated that it would use the $150 million to support office space components across the project sites, according to Chris Cook, managing director of capital access for the Michigan Economic Development Corp., or MSF.
“It’s a loan that will be repaid through the (Transformational Brownfield) tax capture,” Cook told reporters Tuesday. “It’s not like new money being offered by the MSF or state.”
Cook said that in the event of any default, neither the state nor the strategic fund would be on the hook for any money.
“This transaction carries no financial risk to the state,” Nadia Sesay, Bedrock’s chief public finance officer, said in a statement. “MSF’s role is limited to facilitating market access, while the bonds are fully secured by the tax increment revenues generated by the projects themselves.”
A Michigan Strategic Fund fact sheet says that private activity bonds offer cost savings on capital projects for private businesses, stemming from the difference in their interest rates versus ordinary corporate bonds that are taxable.
Private activity bonds are tax exempt because they support projects with a “public purpose” for economic development, according to the fact sheet, which are so-called “qualified private activities” as deemed by the federal tax code.
The strategic fund has approved nine other private activity bond issues since 2023. Those bonds supported a variety of developments, including a pair of waste disposal projects by Chevron and DTE Energy, a new headquarters building in Bloomfield Hills for the William Davidson Foundation, an expansion for The Henry Ford museum in Dearborn and construction of a private firm’s manufacturing facility outside of Grand Rapids.
According to Cook, lawyers for the Michigan Strategic Fund reviewed Bedrock’s planned use of the private activity bond proceeds and found it to be appropriate.
Bedrock’s four Transformational Brownfield projects in downtown Detroit are:
Contact JC Reindl: 313-378-5460 or jcreindl@freepress.com. Follow him on Twitter @jcreindl.
This article originally appeared on Detroit Free Press: Bedrock to borrow $150M more to finish ‘transformational’ projects
Reporting by JC Reindl, Detroit Free Press / Detroit Free Press
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