The development group planning a $56 million conversion of the United Artists Building into apartments is closer to receiving tax abatements for the long-delayed project that also includes demolition of a decaying theater attached to the tower.

It's the first forward momentum in the effort to turn the 18-story building at 150 Bagley St. into 148 apartments since it was announced about 2 1/2 years ago as part of the Ilitch family's District Detroit area's residential plans. Construction is now expected to begin in the first quarter and be complete by the middle of 2021.

The Detroit City Council Planning and Economic Development standing committee recommended approval to establish an Obsolete Property Rehabilitation District and Neighborhood Enterprise Zone property tax abatements on Thursday for Bagley Development Group LLC, which is headed by longtime developer Emmett Moten Jr.

The full council has not yet approved the tax breaks. Their full value is $2.43 million — about $175,000 for the OPRA and $2.25 million for the NEZ, according to Tracey Lynn Pearson, deputy director of media relations for Mayor Mike Duggan.

Moten also said the United Artists Theatre, which opened in 1928 and is attached to the Ilitch family-owned building, is expected to be demolished as a condition of the U.S. Department of Housing and Urban Development providing senior debt on the project through its 221(d)(4) program, which provides a 40-year multifamily construction loan that requires HUD evaluation of the market, demand and other issues. He also said banks had similar requirements to tear down the theater.

"We looked at ways we could use it, and you can't use it for anything," Moten told the standing committee. "They are not going to close on this project unless the building comes down."

In addition, waiting to redevelop it down the line isn't an option because construction would disrupt residents, Moten said.

Francis Grunow, the former chairman of the Neighborhood Advisory Committee for the Arena District, said during the committee meeting that it "positively sends shivers down my spine" imagining a redeveloped United Artists Building. However, he said, the Ilitch family has not delivered on its promises and the Historic District Commission has not weighed in on the matter.

"Our historic structures are one of the few competitive advantages we have as a city," said Eric Kehoe, a historic preservation activist who is a recent former chair of Preservation Detroit. "Continued demolition of them is simply short-sighted and bad economic development policy."

A message was left with Olympia Development of Michigan, which is leasing the property to Bagley Development Group. The company's other investors are Scott Allen, Richard Hosey III, Bob Charles, Jim and Joni Thrower, Wayne Thomas O'Neil Swanson, Roy Roberts and Tom Goss.

C. Howard Crane designed the theater, which sits behind the 18-story office building, both of which opened in 1928. It closed in 1975 and has been controlled by the Ilitch family since 1997, according to Historic Detroit, which tracks the city's buildings and architecture.

The redevelopment was announced in May 2017 as part of what was then a $160 million plan to bring 686 residential units to the Ilitch family's District Detroit area. Construction on the building was to begin in 2017, but the project has struggled to obtain financing.

The District Detroit, unveiled in July 2014 as a 45- to 50-block district of residences, offices, entertainment, bars, restaurants and green space, has largely not come to fruition to date. Much of the area remains vacant buildings and surface parking lots.

A deadline to redevelop the Hotel Eddystone into apartments was missed, and it wasn't until earlier this year that work began on the building immediately north of Little Caesars Arena, the anchor of the District Detroit area. It is expected to cost $40.9 million and receive public financing.

The arena project received nearly $400 million.

The Ilitches also missed a deadline this summer to submit a development plan for a chunk of property at Woodward Avenue and I-75. Last week, Charlotte Fisher, a spokeswoman for the Detroit Economic Growth Corp., said the DEGC and the Ilitches are in "ongoing discussions" as they work "to identify the next steps."

Grunow told the standing committee that "hundreds of millions" in tax abatements went to the arena project and "we have fewer residents and fewer small businesses than when we started."

Council member Scott Benson said the majority of that was state incentives.

A new $150 million headquarters for the Ilitch's Little Caesars pizza chain was built as was the Wayne State University Mike Ilitch School of Business. Google was lured from Birmingham as a tenant to an office building connected to the arena, which is home to the Ilitch-owned Detroit Red Wing and the Detroit Pistons, the latter of which moved downtown in 2017 after 30 years at the Palace of Auburn Hills. Construction has also started on the $70 million Detroit Medical Center Sports Medicine Institute, which is also slated to house the Warner Norcross + Judd law firm.

Moten also plans to tear down the Detroit Saturday Night building at 550 W. Fort St. to create a dozen parking spots for the Fort Shelby.