In the spirit of providing the highest benefit to our community and consistent with how most successful projects throughout our country are structured, a public-private partnership is being created to develop a Catalyst Development Project that will serve the citizens of our city, county, region and state. The following is a summary of the Memorandum of Understanding (MOU) introduced on June 12, 2013, and serves as a non-binding document entered into by the Detroit Downtown Development Authority (DDA), Charter County of Wayne, and Olympia Development of Michigan, LLC (ODM). The MOU serves as the financial framework that will be presented throughout the course of the public process necessary to establish the Concession Management Agreement (CMA), or the legally binding document between the DDA and ODM on the exclusive rights to the Catalytic Development Project.
GENERAL DESCRIPTION OF CATALYST DEVELOPMENT PROJECT:
• Events Center:
o Description: Approximately 650,000 square foot National Hockey League-caliber arena with approximately 18,000 seats designed to be a multipurpose sports and entertainment complex.
• Mixed-Use Ancillary Development:
o Description: Development plan may include retail, office, business, business innovation, housing, education, entertainment and recreation projects.
• The Catalyst Development Project is subject to approval by the Michigan Strategic Fund.
OWNERSHIP STRUCTURE:
• Events Center:
o The DDA will own the events center complex, attached parking garage and associated infrastructure and will enter into a Concession Management Agreement (CMA) with an affiliate of ODM.
• Mixed-Use Ancillary Development:
o Land ownership does not change unless a subsequent development agreement is made.
LAND:
• Events Center:
o The City of Detroit (City), the Detroit Economic Development Corporation (EDC) and ODM will contribute the land for the Events Center to the DDA, and the DDA will enter into a CMA with ODM, giving ODM exclusive rights in the property.
• Mixed-Use Ancillary Development:
o The City and the Detroit EDC will convey all of the property they own within the ancillary development area to the DDA; the DDA will agree to convey it to ODM pursuant to a development agreement.
• Location:
o North of I-75 and West of Woodward as well as the expanded DDA Catalyst Development area.
FINANCING AND CONTRIBUTIONS:
• Catalyst Development Project Cost (in 2013 Dollars):
o The sum of the total mixed-use development, including residential, retail, office facilities and events center, is approximately $650 million.
o Approximately $367 million or 56% of the total project investment will be from private sources.
o Approximately $283 million or 44% of the total project investment will be from public sources.
• Events Center:
o Cost: Approximately $450 million, including financing costs, but excluding reserves for debt service and coverage ratios; all of the annual payments terminate when the bonds have been paid in full, estimated at 30 years.
Revenue bonds to be issued by the Michigan Strategic Fund
ODM will be responsible for construction cost overruns
o Approximately $12.8 million annually (not to exceed $15 million) currently estimated in annual property tax authorized by the 2012 DDA Act (“Catalyst Project Revenues”).
o Approximately $11.5 million annually from ODM, payable during the terms of the bonds.
o Approximately $2.15 million in average annual payments made by the DDA from annual property tax collection during the term of the bonds.
• Mixed-Use Ancillary Development:
o ODM will commit to enter into, or cause others to enter into, development agreements for projects within the area around the events center with a private investment of at least $200 million within five years after the events center opens.
o Public funds generated by Catalyst Project Revenues in excess of $15 million per year (up to a maximum of $62 million) will be provided in support of the developments in the area adjacent to the events center.
CONCESSION MANAGEMENT AGREEMENT BETWEEN THE DDA AND ODM:
• ODM will have exclusive rights to use, manage and operate the events center, including the rights to all revenues (including naming rights).
• ODM will agree to pay $11.5 million annually, beginning at occupancy and terminating when the bonds are paid in full (approximately 30 years).
• ODM will pay costs of maintenance and necessary capital improvements; a reserve fund will be established with deposits of $500,000 per year, starting four years after the Bond closing, escalating at four percent per year.
• Term: 35 years, with 12, five year renewal options in favor of ODM.
DESIGN AND CONSTRUCTION:
• ODM will manage the project but will consult with the DDA and Wayne County; similar to the process used with Comerica Park.
DISADVANTAGED, MINORITY, WOMEN AND CITY RESIDENT-OWNED BUSINESSES:
• Comply with Executive Order 2007-1 – Work with the City and County to appoint a third party to assist in the development and administration of a program for involving Disadvantaged, Minority, Women, City and County Resident Owned Businesses. Note that this Executive Order requires 51% participation by Detroit residents in the construction of the project.
JOE LOUIS ARENA
• An agreement extending the Joe Louis Arena lease is a condition for finalizing the transaction.
CONDITIONS:
• Approvals by the DDA, Detroit City Council, Wayne County Commission, the Michigan Strategic Fund, the Detroit EDC and others, as well as the ODM Board.
