Matt Helms

Detroit Free Press

While Wayne County’s leaders mull over Dan Gilbert’s Rock Ventures' offer to build a new county jail and court complex downtown, a number of experts in urban development and commercial real estate are giving the proposal high marks.

Rock Ventures last week revealed a plan in which it would build a $420-million Wayne County Jail and criminal justice complex near I-75 and Warren Avenue in exchange for getting control of the current jail and court sites it wants on Gratiot at I-375 where Gilbert and fellow billionaire and Detroit Pistons owner Tom Gores want to build a Major League Soccer stadium and other mixed uses.

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In a nutshell, Rock Ventures says it would build the project with $300 million from the county — the amount the county says it would take to complete the existing unfinished facility. The facility proposed by Rock Ventures would include a consolidated jail, juvenile detention facility and criminal court to replace the Frank Murphy Hall of Justice.

Rock Ventures would take responsibility for any cost overruns and, in return, would get the downtown property and a share of any savings Wayne County would realize from running a modern, consolidated criminal justice center that would, presumably, require fewer employees, less maintenance and cost less energy-wise.

Rock Ventures' proposal calls for building a soccer arena downtown along with potential hotel, office, retail, residential and parking facilities, all told about $1 billion.

Tom Murphy, a senior fellow at the Urban Land Institute, a nonprofit research and education organization based in Washington, D.C., that focuses on responsible land use, called the proposal a good deal for the county after reviewing the preliminary Rock Ventures proposal at the request of the Free Press.

“There’s no public commitment other than the land in this deal,” said Murphy, who as mayor of Pittsburgh in 1994-2005 helped shepherd a deal that built two new sports arenas and a convention center that have helped revitalize sections of that city.

“That really seems like an incredible deal for the public and the taxpayers," Murphy said. "You have also the county and the city getting the potential of $1 billion in new investment. That would be calculated into hundreds of thousands — if not millions — in new revenue each year.”

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Wayne State University law professor John Mogk, an urban development expert, said he had anticipated such an offer from Gilbert's organization and called the proposal “a really wise approach to resolving the conflict that exists.”

Mogk, who has advised the state, Wayne County and the City of Detroit on urban redevelopment issues, said the deal should be especially appealing to the county because Gilbert's organization has a solid track record of real estate investment and rehabilitation in Detroit. Gilbert entities and real-estate partners own or control more than 80 buildings and retail sites in the city.

"The only question is, financially, how does the county make out?” Mogk said. “In my view, this is the only way to get a soccer stadium out of it and get a first-class criminal justice complex built. It’s just a matter of making sure the benefits each side receives are fair.”

That is what Wayne County Executive Warren Evans' team has been working to determine as it decides whether to accept the offer or go ahead with previous plans to restart construction on the jail that has been stalled for more than three years. Construction was halted under former Wayne County Executive Robert Ficano amid concerns about cost projections putting the jail about $90 million over budget.

Evans' administration has proceeded as if building the jail at its current site would be the most economical way to complete the project, but did not rule out competing plans if they didn't cost additional money to taxpayers.

Among the issues the county will have to consider are whether the facilities will meet the county's space needs for jail beds, court space and the like, and whether financial terms of the proposal are realistic and protect taxpayers from overruns. The stalled jail project was to house 2,000 beds. Rock's offer is to build a 1,600-bed facility, with an option to add 400 more beds at a cost of $43 million.

Evans' spokesman Ryan Bridges said Friday that the administration was still vetting the proposal but declined additional comment. Evans plans a news conference at 10 a.m. today for an update on the Rock Ventures offer.

Steve Morris, managing principal of Axis Advisors, a Farmington Hills commercial real estate services firm, and who teaches commercial real estate finance at the University of Michigan's Ross School of Business, said there's still room for negotiating and fine-tuning the deal. Morris said it's likely that the proposal represents Gilbert's "second best offer — probably not his best offer, but close."

But, he said, it's clear that the plan for a soccer arena and related commercial development would be much better for the property than a jail site that keeps the property off the tax rolls.

"To have that existing site transferred at a minimum to the soccer stadium is clearly a far higher, better use than a jail site, considering its proximity to other downtown attractions," he said. "It would be a win-win for both sides."

Assuming the county and Rock Ventures were able to negotiate to a final agreement, Morris said, it would likely represent a money savings for Wayne County that also would take off the table the additional risk of more costs for completing the jail.

One thing developers often seek in such projects is tax incentives. Morris said that even if the arena project comes with some tax incentives, "they’re not forever, and that will continue to provide a lot more revenue to the city and county coffers.”

In the deal, Rock Ventures also would get a potentially lucrative chunk of downtown property. But figuring out the value of that land isn't easy.

Several metro Detroit commercial real estate appraisers said determining the value of the Gratiot land is difficult to do because there are few comparative land deals. Even trying to factor in how renewed demand in downtown might affect land prices would be imprecise because of a limited number of major players in large-scale redevelopment deals.

Marc Nassif, a senior managing director of national real-estate valuation company BBG, said that Detroit has only a handful of major development firms interested in and capable of pulling off a development as large as what Rock Ventures proposes. They include Rock Ventures and the Ilitch family's Olympia Development.

"There’s only so many groups that are doing that kind of work in Detroit,” said Nassif, who works out of the Livonia office of Dallas-based BBG.

What's more, there's also risk involved for Gilbert and Gores.

Murphy said the success of the soccer arena will require developing a strong enough fan base to support an expansion team in Detroit, a city that already has four professional sports teams with much wider audiences.

Rock Ventures' plans for a hotel, residential and additional retail and entertainment venues also will provide a test of how much the Detroit market can support new restaurants, bars, stores and the like, Murphy said.

"You don’t want to give away the store, but also don’t want to discourage people willing to take a risk where the market is unknown or fragile," Murphy said.

Contact Matt Helms: 313-222-1450 or mhelms@freepress.com. Follow him on Twitter @matthelms.