A new 20-story office tower downtown won't be entirely privately financed, after all, now that Chemical Bank's planned new headquarters has received $16.7 million in brownfield financing with a Tuesday vote of the Michigan Strategic Fund.

The bank now says Detroit developments regularly need incentives and that as a result of its merger deal with TCF Bank, there is a change in plans that will see it going from owner of the building to a renter. The planned landlord would be an entity tied to Detroit-based real estate company Sterling Group, which Chemical Financial Chairman Gary Torgow founded and is now owned and run by Torgow's sons.

The proposed Chemical Bank headquarters at Woodward Avenue and Elizabeth Street was announced a year ago as the bank that was based in Midland at the time said it was bringing 500 people to work downtown.

The public financing marks a departure from a previous statement made by Chemical Bank executives to the Michigan Economic Development Corp. to entirely privately finance the building, which is to be sandwiched between the Francis Palms Building to the north and the Fyfe Building to the south on the west side of Woodward.

"Chemical Bank will self-fund the Project in the amount of $116,000,000, together with a contingency of 10%, being an additional $11.6 million, for a total Project funding amount of $132,600,000" plus $5 million that allows it to access debt, William Collins, executive vice president and general counsel of Chemical Bank, wrote in a letter to the Michigan Economic Development Corp. in November.

"This has been the funding plan from the beginning; Chemical Bank does not anticipate obtaining funds for the Project from any other party."

Tom Wennerberg, a spokesman for Chemical Bank, wouldn't say specifically why tax incentives are needed now, but noted that many of Detroit's largest development projects have public financing.

"Certainly a lot of development that happens downtown needs it and requires it for a project like this," he said. "Our stance on this one is when we were looking to be the builder, there was a different dynamic there than when we became a lessee."

That dynamic is because of a merger between Chemical Bank and TCF Financial Corp., the shareholders of which approved the merger earlier this month. The deal is expected to close by the early fourth quarter and create a $45 billion-plus bank, the largest midcap bank in the Midwest. It plans to operate under the TCF Bank name.

Wennerberg said owning versus leasing the new headquarters was a negotiating point during the Chemical Bank/TCF discussions.

"TCF (has a) preference for not owning buildings but to actually do more long-term leases," Wennerberg said.

Rather than Chemical Bank developing and owning the building, it will instead be developed and owned by an affiliate (GPC Adams LLC) of Detroit-based Sterling Group, which Chemical Bank Chairman Gary Torgow co-founded. Wennerberg said Torgow has not been involved with Sterling Group since 2009.

Wennerberg said Torgow is founder and chairman emeritus but collects no salary or other pay from Sterling Group, which is owned and run by Torgow's sons out of the Fort Washington Plaza building downtown at 333 W. Fort St.

Chemical Bank also leases space in the building.

A message was left with Sterling Group on Tuesday morning.

The strategic fund also said the city has awarded the project a $10.49 million property tax abatement.

The new high-rise is expected to be 420,000 square feet with 7,500 square feet of first-floor retail/commercial space. Office space is expected to take up 10 floors and 185,000 square feet, while parking is expected to take up nine floors and 227,500 square feet for 311 spaces.

Wennerberg said a groundbreaking ceremony is anticipated in the next 90 days.

An MSF board memo says Sterling Group "has maximized senior lending and is contributing over 28 percent in cash equity toward the project."

It also says that without the public financing, "the cost burden related to brownfield conditions would make the project financially unfeasible."

Crain's reported in December that the plan involves tearing down the 10-story building at 25 W. Elizabeth St. used most recently as the Elizabeth Street annex of the Grand Park Centre office tower.

It is owned by an entity called 28 Associates LLC, which is registered to Sterling Group's general counsel, Eli Halpern. An additional 0.2-acre property 2047 Woodward Ave., also owned by 28 Associates, is part of the development footprint.

The move to Detroit is intended to help Chemical Bank, which absorbed Troy-based Talmer Bancorp Inc. in 2016, grow in metro Detroit and add to its strength in outstate Michigan.