Joe Louis Arena site developer wants 2-year extension

The new owners of the land occupied by Joe Louis Arena filed a lawsuit against the City of Detroit on Monday, requesting a two-year extension on what to develop on the riverfront site.

The lawsuit was filed in U.S. Bankruptcy Court by Gotham Motown Recovery, the company created by Financial Guaranty Insurance Company (FGIC), which owns the rights to develop the site. FGIC is a bond insurer that was owed $1.1 billion by the city before Detroit filed for Chapter 9 municipal bankruptcy. The city agreed to give the arena site and parking garage to the the FGIC as part of the settlement deal. The city must tear down the arena as part of that deal.

But more than three years after that deal was struck, that lawsuit reveals deep sticking-points between the developer and the city. The lawsuit lists 15 “unforeseen complexities” that are preventing plans to move forward. The result is that the original deadline of late 2017 to come up with a development proposal has already passed.

The city wants to give the developer until August to come up with a plan. The developer says it needs up to two years to work out all the issues.

The city rejected the lawsuit’s portrayal of the situation.

“The city believes this suit has no merit and will respond appropriately to the complaint in court,” Detroit Corporation Counsel Lawrence Garcia said in a statement.

The lawsuit contends the city is largely responsible for not meeting the original deadline and it has yet to even provide a specific date when the arena will be demolished. Joe Louis Arena was a city-owned facility that was home to the Detroit Red Wings as well as a concert venue. The Wings moved to Little Caesars Arena last fall and the venue was shut down last year, although staff for the Red Wings took longer to move to the new venue.

The lease with the Red Wings owners officially expired Feb. 1, according to the city officials. According to the bankruptcy agreement, the city needs to “commence or cause to be commenced” the demolition of the arena within 90 days.

Tyrone Clifton, director of the Detroit Building Authority, said the city is seeking consultants to perform environmental assessments on the arena site. Those assessments must be performed prior to demolition and should begin in the next few months, Clifton said.

“The studies themselves will take several more months beyond that,” Clifton said.

An engineering consultant will then be hired to develop a framework for the demolition, he said.

The city, the lawsuit contends, is sending mixed signals for what it wants developed there. The original agreement states that FGIC was to find a partner to build a hotel with a minimum of 300 rooms and be no taller than 30 stories, according to the bankruptcy agreement. Development could also include “office, retail, commercial, recreation, residential.” But city officials have since backed off that hotel component, the lawsuit contends.

The lawsuit says the city refuses to grant Gotham its request for a two-year extension on submitting the development proposal. The city says the issues can be resolved in 180 days, which would mean August.

“The city has fulfilled its end of the deal and the position being taken is within our rights under the contract and under the law,” Garcia said in his statement.

FGIC CEO Tim Travers, on behalf of Gotham, said in a written statement Monday, “We are concerned that the city’s actions may hinder and delay a successful development on the Joe Louis Arena site, which is our objective.”

The suit cites “significant changes in the downtown Detroit real estate market since 2014 and the increased complexity of the development project” gave Gotham the right to request a two-year extension.”

Travers said, “We have dedicated tremendous resources to the project and had been working closely with the city to ensure a successful development. We are surprised and disappointed that the city has now chosen not to cooperate with us, requiring Gotham to file this lawsuit.”

Rob Snell of The Detroit News contributed.

laguilar@detroitnews.com

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