National City Closes on First Sale of a Condo Unit in the New Book Cadillac Hotel - Sets Benchmark for Residential Value of New Condos in Detroit

DETROIT, Oct 07, 2008 /PRNewswire-FirstCall via COMTEX/ -- National City has announced the closing of the first sale of a condo unit in the new Book Cadillac Hotel.

The 1,401 square foot unit sold for $463,550, which equates to $331 per square foot, a new appraisal benchmark for Detroit. The next closings are expected on October 9 by other lenders with six by National City to follow shortly thereafter.

David Boyle, president for National City in Michigan, said, "As the lead investor in the Book Cadillac renovation, with over $38 million invested, and as the presenting sponsor of the October 25 grand opening gala, we are proud to announce this milestone, which establishes a new residential value for condo sales in the city."

He emphasized, "Over the past 10 years, National City has been at the forefront in community development for downtown Detroit and the surrounding neighborhoods. We welcome our responsibility to lead the way as a partner in our city's renaissance."

National City provided the final sources of financing which made the Book Cadillac deal complete. The equity investment allowed the other pieces of financing to fall into place.

The National City CDC approved the purchase of a condo unit which made the project eligible for the bank's unique NCHAMP (National City Housing Affordable Mortgage Program) mortgage loan. NCHAMP provides for a conventional 15 or 30-year fixed-rate loan with no points and priced at one and one-half percent off the current interest rate.

Dick Buss, director of the National City CDC in Michigan, explained that National City was the key investor in the first "Chicago-style" loft project, The Canfield Lofts in the Midtown neighborhood. This was followed by current projects including: The Ellington (new construction at Woodward at Mack), The Vinton (a historic rehabilitation at Woodward at Congress), The Riverfront Condos (Tower 300, a conversion of apartments to condos), and The Willys-Overland Condos (an industrial loft rehabilitation project on W. Willis at Cass.)

National City has also been the first and the leading bank investor bringing the value of federal New Markets Tax Credits for commercial development to support housing in Detroit's neighborhoods. The National City CDC has approved more than $30 million of equity investments for eight projects as varied as Midtown's N'Namdi Art Gallery, the Mexicantown Welcome Center and Mercado, and Techtown's business incubator and coffee shop.

Boyle concluded, "National City formed the first CDC in the country in 1982. Under the extraordinary work of Dick Buss and our development teams, our CDC enjoys a strong record of equity investments that lead the way in revitalizing our neighborhoods by delivering quality residential options."

SOURCE National City Corporation

Detroit residential market slows; bright spots emerge

By Daniel Duggan, Crain's Detroit Business
October 5, 2008

Detroit developers speak fondly of the environment of a few years ago, when there seemed to be a condo development planned at every corner.

While there still are new projects in the planning and building phases in Detroit, it's far from the harried pace it once moved at.

But don't say it's dead.

“There are still things getting done; there's small businesses, rental projects and for-sale projects,” said Sue Mosey, president of the University Cultural Center Association.

Mosey's group works to spur development in what remains the hottest area, the Midtown community, where loft developments are still being proposed in gritty former industrial buildings.

In Detroit's waterfront area, the most marketed project is the 112-unit Watermark proposed on Detroit's riverfront by Dave Bing's Springarn Development L.L.C.

Another high-end project is the 64 luxury condos on top of the Westin Book Cadillac hotel near Detroit's central business district.

Northwest of the business district, Detroit-based Made in Detroit has proposed 93 luxury residential lofts in the former Detroit Creamery building near the MotorCity Casino.

In the category of “interesting,” developers Patrick and Leslie Horn plan to build a 17-unit condominium complex out of 85 metal shipping containers at a cost of $1.8 million, with units selling for as low as $100,000.

But building and planning projects is one thing — selling is another.

While all of metro Detroit has undergone a quiet increase in residential sales compared with last year, the city of Detroit has seen the biggest increases.

In August, the region's sales were up 11 percent over August 2007, marking the eighth straight month of increases, according to the Farmington Hills-based MLS RealComp II Ltd.

Detroit, however, posted an August increase of 38 percent, marking increases every month this year. And pending sales in Detroit — 1,600 as of August — mark a 49 percent increase over 2007.

“I've been seeing a lot more interest than last year, and seeing more sales as well,” said Austin Black II, a Realtor in the Birmingham office of Max Broock Realtors who specializes in Detroit sales.

The deal flow is still restrained on the buying side by sluggishness on the selling side, he said.

“I've had people willing to sell their houses at a loss since they can make it up in the savings they're getting on the home they buy,” he said. “But there are people who are upside down on their homes by $100,000 — and there's not much you can do.”

While the condo projects get all the attention, Black said he's seen the most deals taking place for single-family homes.

The reason, primarily, is financing.

Single-family homes can qualify for many of the first-time homebuyer programs under the Federal Housing Administration. As a result, buyers can purchase a single family home with a 3.5 percent down payment compared to 20 percent for some condo deals.

“People are looking at the lending and the space they get for the money,” Black said. “Single-family homes can be appealing.”

Lending constraints have been a daily struggle for the condo developers in Detroit.

At the Willys Overland Loft project near Wayne State University, nine units have been sold, but there are 15 more reservations for units, said Kyle Campbell, development manager for Plymouth-based DeMattia Group and Detroit-based Midtown Development Group.

“All of those people are ready to buy, but they're waiting for a house to sell or just get lending,” he said.

Another way around the lending problem is to switch from for-sale to rental.

Campbell said he gets calls on a regular basis from people asking if Willys has switched.

Some projects, such as 55 West Canfield, are switching to rental as a way to see units occupied.

“Rental has become a strong sector,” Mosey said. “Some of the for-sale developments are discounting, but others are just switching to rental.”

Daniel Duggan: (313) 446-0414, dduggan@crain.com