Councilman calls out Joe Louis Arena developer who asked for new delay

Jun. 21--A proposal to give a City of Detroit bankruptcy creditor another extension to its deadline for redeveloping the Joe Louis Arena site is getting a cold reception from some elected officials.

"Why are we aiding them in their sloth? They haven't done any work it seems to me," Detroit City Councilman Scott Benson said Thursday during a meeting of the council's Planning and Economic Development subcommittee. "They need to be out looking for financing and looking for tenants."

New York-based Financial Guaranty Insurance Corp. has asked the city for a 17-month extension to its deadline to submit the redevelopment plans, which would move that date to June 15, 2021.

Two years ago, the insurance company sued the city to get its original deadline moved from fall 2017 to Jan. 15, 2020, and to also gain flexibility to possibly build something other than a required "first-class" hotel with at least 300 rooms.

Financial Guaranty, a bond insurer, accepted future ownership and development rights to the arena site and its 3,200-space parking garage during Detroit's 2013-14 bankruptcy in exchange for getting roughly 13 cents on the dollar for its $1.1-billion claim against the city.

The deal was negotiated when Detroit was under emergency management.

Demolition is now underway at the old hockey arena, which opened in December 1979 and hosted its last public event in July 2017. The city is responsible for the demolition's estimated $13.5 million costs, which is being financed through a $10-million loan from the Michigan Strategic Fund. The arena is to be completely down sometime in the first quarter of 2020.

If the bond insurer misses the deadline for submitting redevelopment plans, the city can potentially keep title to the site and the parking garage, said city spokesman John Roach.

Financial Guaranty did not return phone calls Thursday about why it wants another deadline extension.

Chuck Raimi, the Detroit's deputy corporation counsel, said at Thursday's council subcommittee meeting that Financial Guaranty wants to see the arena down completely.

"They cannot really in fairness create a plan until the Joe Louis is demoed, and that has been their position right along," Raimi said.

Yet Councilman Benson questioned why the company is having trouble and needs another time extension because, in his view, the arena site is prime property for projects such as a hotel because of its riverfront location next to Cobo Center.

"You give somebody Grade A property, next to a conference center, which means you have a captured audience," said Benson, who was visibly frustrated. "They (conference goers) have to stay somewhere, why not stay there. And you still can't make that deal work?"

Raimi said there are nevertheless concerns that the arena property that hugs the Detroit River could be difficult for people to reach.

He also said he does not expect the insurance company to seek a third deadline extension in the future beyond 2021.

"I think surely this will be the last extension," he said.

The City Council subcommittee is to take up the deadline extension proposal again July 11.

Contact JC Reindl:313-222-6631 or [email protected]. Follow him on Twitter@jcreindl. Read more on business and sign up for our business newsletter.

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