Thanks to a billionaire, Detroit is new and improved – but for whom?

Detroit's Qline train speeds past the offices of Bedrock, a real-estate firm owned by billionaire Dan Gilbert.Photography by Sylvia Jarrus/The Globe and Mail

When Dan Gilbert moved the headquarters of Quicken Loans to downtown Detroit in 2010, the city was hitting rock-bottom. Art deco skyscrapers sat empty, long-shuttered businesses lined its main street along Woodward Avenue and the municipal government was spiralling toward bankruptcy.

Born in the city in 1962, near the start of its decades-long decline, Mr. Gilbert and his arc had bent in inverse parallel to that of his hometown. A lawyer and realtor by profession, he co-founded the company that would become Quicken in 1985 and built it into a major lender, ultimately becoming the richest man in Michigan.

Along the way, the gruff-voiced, silver-haired entrepreneur developed a brash public persona. As majority owner of the Cleveland Cavaliers, for instance, he once famously excoriated LeBron James in an open letter when the NBA superstar decided to leave the team.

By Mr. Gilbert’s late 40s, it was time for the next chapter. He and 1,700 employees decamped from the suburbs to the city centre, bringing a sudden infusion of white-collar jobs to a struggling local economy. Then he started buying up buildings. Through his real estate firm, Bedrock, Mr. Gilbert took over more than 100 properties, mostly heritage buildings, refurbished them and brought in new offices, businesses and residents.

His motivation was a mix of business instinct and civic attachment. “I’m a fourth-generation Detroiter,” Mr. Gilbert, a wiry man with a slicked hairstyle and goatee, said at a Milken Institute event last year. “It gets in your blood, in your DNA.”

Mr. Gilbert, shown in 2017.Phil Long/The Associated Press

Today, downtown Detroit is a place transformed. Along Woodward, high-end restaurants and new clothing stores jostle for space. Hipsters and office workers crowd bars and cafés in cobblestone alleyways. The two-year-old QLine, a streetcar whose naming rights Mr. Gilbert bought, trundles past.

But this urban renaissance has also drawn tough criticism.

For one, Quicken and Bedrock are accused of building an affluent island in the centre of a low-income city. While Mr. Gilbert’s spending has revitalized the central business district, much of Detroit remains economically distressed with neighbourhoods full of boarded-up businesses and burnt-out houses. Detroit’s racial divides factor in, too: Recent developments have tended to concentrate in the whiter neighbourhoods of a city where 79 per cent of the population is black.

For another, Bedrock and its related companies have received US$767-million worth of government subsidies and tax breaks since 2010. To some, this is an egregious use of funds when Detroit’s schools and transit system are struggling. Mr. Gilbert’s critics argue a man with a net worth Forbes estimates at US$6.8-billion has no need for government assistance.

Whether Mr. Gilbert is the hero Detroit needed to pull it back from the precipice or an unaccountable billionaire wielding an uncomfortable amount of civic power, his rise represents an extraordinary moment in U.S. urbanism. The rapid rebirth and future of one of the country’s greatest and most troubled cities rests largely in the hands of one man and his corporate empire, which is both animating the metropolis with its workforce, and directly shaping the look and feel of its streets and buildings.

Just how central Mr. Gilbert has become to the city was thrown into stark relief this spring when he suffered a stroke. The health scare, which has required months of recuperation, transfixed local media and raised questions about what would happen in his absence.

But those close to him insist his work in the Motor City is just getting started.

Downtown Detroit. At its peak in the 1950s, nearly two million peopled lived in this city, but decades of social unrest and the decline of manufacturing jobs led residents to move away. Today, the population is below 700,000 and is mostly black, and the patterns of inequality and urban vacancy on a map are a testament to the city's troubled history.

Detroit still plagued by vacant buildings

Vacant property registrations as of October

6.5

MICHIGAN

Detroit

Chrysler

Plant

Quicken

Loans

Windsor

ONT.

Majority of residents make less than $50K

Median income by census tract, 2017 ($U.S.)

$0-$20k

$20k-$40k

$40k-$60k

Note: Highland

Park and Hamtramck

are not part of Detroit

$60k-$80k

$80k-$100k

Detroit predominantly African-American

Percentage African-American by census tract*

20% or below

20 to 40%

40 to 60%

*Census five-

year estimates,

2013-2017

60 to 80%

80% and above

john sopinski and murat yükselir/the globe and mail, source: TILEZEN; OPENSTREETMAP CONTRIBUTORS; HIu; U.S. Census bureau; city of detroit; qgis

Detroit still plagued by vacant buildings

Vacant property registrations as of October

6.5

MICHIGAN

Detroit

Chrysler

Plant

Quicken

Loans

Windsor

ONT.

Majority of residents make less than $50K

Median income by census tract, 2017 (U.S. dollars)

$0-$20k

$20k-$40k

$40k-$60k

Note: Highland

Park and Hamtramck

are not part of Detroit

$60k-$80k

$80k-$100k

Detroit predominantly African-American

Percentage African-American by census tract*

20% or below

20 to 40%

40 to 60%

*Census five-

year estimates,

2013-2017

60 to 80%

80% and above

john sopinski and murat yükselir/the globe and mail, source: TILEZEN; OPENSTREETMAP CONTRIBUTORS; HIu; U.S. Census bureau; city of detroit; qgis

Detroit still plagued by vacant buildings

Vacant property registrations as of October

Southfield

Eastpointe

E. Eight Mile Rd.

Oak Park

Eight Mile Rd.

Highland

Park

Hamtramck

Grosse

Park

Woodward Ave.

Chrysler

Plant

Detroit

Dearborn

Heights

Dearborn

Windsor

Quicken

Loans

MICHIGAN

E.C. Row Expwy.

Detroit Metro.

Wayne County

Airport

Detroit River

Melvindale

River

Rouge

6.5

ONTARIO

Majority of residents make less than $50K

Median income by census tract, 2017 (U.S. dollars)

Detroit predominantly African-American

Percentage African-American by census tract*

$0-$20k

20% or below

$20k-$40k

20 to 40%

$40k-$60k

40 to 60%

Note: Highland

Park and Hamtramck

are not part of Detroit

*Census five-

year estimates,

2013-2017

$60k-$80k

60 to 80%

$80k-$100k

80% and above

john sopinski and murat yükselir/the globe and mail, source: TILEZEN; OPENSTREETMAP

CONTRIBUTORS; HIu; U.S. Census bureau; city of detroit; qgis

Detroit has been through a particularly protracted urban unravelling.

A city that grew prosperous as the centre of automobile manufacturing watched its flagship industry move facilities to the suburbs in the postwar period, taking jobs and residents with it. Then, that industry steadily declined amid the globalization of manufacturing.

Racial tensions, meanwhile, exploded over five brutal days in the summer of 1967. A police raid on an unlicensed bar turned into a riot that saw the army called in, 43 people killed, buildings torched and white residents fleeing to suburbia.

Corruption and mismanagement at City Hall didn’t help matters. In one particularly egregious case, Kwame Kilpatrick, mayor from 2002 to 2008, is currently serving a 28-year prison sentence for a scheme that traded government contracts for kickbacks.

From a peak near two million in the 1950s, Detroit’s population has fallen to fewer than 700,000.

This was the context in which Mr. Gilbert was raised. His earliest memory, he said at the Milken event, was of his father unable to go to work because of the 1967 riot. For much of his life, the only reason to trek downtown was for sporting events. And it was the context he was determined to change when he moved Quicken to a building on Campus Martius, Detroit’s central square.

People walk by Campus Martius, the central square of downtown Detroit.

But Mr. Gilbert didn’t stop there. Rather than simply bring employment to the city, he decided to build the downtown he wanted to see.

“He had the capacity and the vision to think of it in a big bang. He just said ‘We’re going to do it all. We’re creating jobs through Quicken Loans, we’re also going to create this entrepreneurial network, we’re also going to invest in retail on Woodward and we’re going to invest in residential,’ ” said Bedrock CEO Matt Cullen at the company’s offices, whose hardwood floors, exposed brick and long communal workstation – all housed in an 1898 former hotel building – better resemble the digs of a tech startup than those of a property developer.

On seemingly every block sit Bedrock buildings, from the bright orange art-deco Stott skyscraper to the neoclassical Vinton building to the Book Tower, an enormous 1917 Italianate edifice. Quicken has also expanded exponentially, its local workforce growing tenfold to 17,000 in less than a decade.

Bedrock has been careful to avoid the blunders of previous urban renewal efforts in Detroit – most famously the fortress-like 1977 Renaissance Center, cut off from the rest of downtown behind parking lots and grassy knolls. By contrast, Bedrock’s developments are designed for maximum connection to the city, with streetfront retail and a mix of uses. One block on Woodward, for instance, features the boutique Shinola Hotel along with two independent clothing stores, a restaurant, a craft-beer bar and apartments on the upper floors.

“We, as very large-scale developers, have a big portfolio, and with that comes a lot of power,” said Melissa Dittmer, the company’s chief design officer. “We have leadership in place who understands the power of that scale of portfolio and is trying to address inclusivity across all of it.”

The next step is to move from restoring existing buildings to putting up new ones. These include two massive mixed-use high-rise complexes on Woodward and Monroe avenues, and an expansion of Quicken’s headquarters.

There were other factors in Detroit’s rebirth, from political leadership that restored fiscal order at City Hall to other corporate leaders who poured money into downtown developments. But Mr. Gilbert’s multibillion dollar spending has been key.

“To have a major investor come in and buy up 70 per cent of the buildings in downtown, move its headquarters downtown, and make that kind of investment in one place, had the kind of momentum that was needed,” said Anika Goss-Foster, executive director of Detroit Future City, an urban-affairs think tank. “It required that sort of laser focus in one area.”

Sonia Brown, nicknamed 'Auntie Na,' hands out fruit cups and cookies to neighbourhood children. She's purchased many of the homes and vacant lots on her block, where she's lived since childhood, to turn them into social services like a free health clinic and community gardens.

Petosky-Otsego is 15 minutes by car from the centre of Detroit, but the west-side neighbourhood feels a world away. Stately three-storey homes sit empty, some with roofs caved in, others with interiors gutted. Champagne-brick storefronts are boarded up with weathered white plywood. On some blocks, nearly every building has been torn down, leaving acres of urban prairie where grass and weeds grow wild.

Sonia Brown was raised here in the 1960s in the same white bungalow where she still lives. Over the years, all but two of the dozen houses on her block became vacant as residents moved away or faced foreclosure.

With a combination of donations and charitable grants, Ms. Brown, a health-care worker by profession, has started buying the homes and vacant lots along the street, fixing them up and turning them into DIY social services. There’s a community kitchen and food pantry, a free health clinic staffed by volunteer medical students, an after-school tutoring program, community gardens and summer camps.

“This shows the ability to bring life back to something that was dying,” said Ms. Brown, sitting in the front room of one recently renovated house on a rainy September afternoon. “My grandchildren are now able grow up in that communities-unities concept that I grew up in.”

The city sorely needs her efforts. Detroit’s 38 per cent poverty rate is nearly three times the national average and median household income of US$30,344 annually is about half.

Detroit near bottom of property value pile

Select median property values, 2017

Grosse Pointe Park, Mich.

United States

Detroit-Warren-Dearborn

Michigan (state)

Dearborn, Mich.

Warren, Mich.

Dearborn Heights, Mich.

Wayne County, Mich.

Oak Park, Mich.

Eastpointe, Mich.

Melvindale, Mich.

Hazel Park, Mich.

Hamtramck, Mich.

Detroit (city)

River Rouge, Mich.

Highland Park, Mich.

100

200

$300K

john sopinski/the globe and mail

source: U.S. Census bureau

Detroit near bottom of property value pile

Select median property values, 2017

Grosse Pointe Park, Mich.

United States

Detroit-Warren-Dearborn

Michigan (state)

Dearborn, Mich.

Warren, Mich.

Dearborn Heights, Mich.

Wayne County, Mich.

Oak Park, Mich.

Eastpointe, Mich.

Melvindale, Mich.

Hazel Park, Mich.

Hamtramck, Mich.

Detroit (city)

River Rouge, Mich.

Highland Park, Mich.

150

100

200

250

$300K

john sopinski/the globe and mail

source: U.S. Census bureau

Detroit near bottom of property value pile

Select median property values, 2017

Grosse Pointe Park, Mich.

United States

Detroit-Warren-Dearborn

Michigan (state)

Dearborn, Mich.

Warren, Mich.

Dearborn Heights, Mich.

Wayne County, Mich.

Oak Park, Mich.

Eastpointe, Mich.

Melvindale, Mich.

Hazel Park, Mich.

Hamtramck, Mich.

Detroit (city)

River Rouge, Mich.

Highland Park, Mich.

100

150

200

250

$300K

john sopinski/the globe and mail, source: U.S. Census bureau

But Ms. Brown, known in the neighbourhood as Auntie Na after a diminutive of her middle name Renia, is stridently against Bedrock or other corporate developers coming into the area. In her view, the new buildings rising downtown have nothing to offer her community and would only push people out.

“It’s the dollars that’s fixing to talk. The rest of us are about to walk. They’re putting us out of our own city,” she said. “I can’t afford that $180,000 home. I can’t pay $1,700 for your apartment.”

Her fears are well-founded. One City Hall study estimates that as many as 10,000 units of affordable housing could be lost in the next five years because of rising rents and condo conversions spurred by the city’s revitalization.

Ishmail Terry stands in front of a building he plans to restore into the headquarters of Pleasant Heights Economic Development, a community group he founded.

A few blocks away, Ishmail Terry walks around his neighbourhood pointing out its vanished landmarks. The local pizza place – closed. A doctor’s office – closed. The spot with the area’s best corned beef sandwiches – replaced by a biker gang clubhouse. As a child in the 1970s, he remembers Halloween street parties and mobile, truck-mounted pools arriving in summer.

“When I was growing up here, we had swim-mobiles, library-mobiles. People were in these places, people would use these places,” said Mr. Terry, a tall, bearded 47-year-old, as he passed a string of vacant shops on Dexter Avenue, some boarded up and others with windows smashed and interiors stripped. “Now look at it.”

Mr. Terry runs two community organizations, All Four One and Pleasant Heights Economic Development, that aim to revive the area. His work has included building two parks with government grants and trying to match new businesses with city-owned repossessed properties they can take over. His current project is setting up a farmer’s market in a red-brick building with chipping green paint.

“The city is so focused on downtown. Over here, it’s been 30 years we’ve been basically told they’re going to do something,” he said. “I’m just tired of seeing the shucking and jiving.”

Mr. Terry points to the stark wealth and racial divides between the areas benefiting from the renaissance and those being left out: One downtown census tract, for instance, has a median household income of US$68,000, a median home value of US$188,000 and a population that is 52 per cent black. The census tract in which Ms. Brown lives, by comparison, has a median household income of US$21,000, a US$29,000 median home value and a population that is 93 per cent black.

Reverend Joan Ross, a community activist in the North End area, argues that the city and state have not demanded enough from Bedrock as a condition of subsidizing its developments. What good, she asked, are the company’s city-building aspirations when 150,000 homes have been foreclosed on since 2002?

“We can take all of these tax subsidies to do that development, but we don’t have the foresight and the ability to create some kind of permanently affordable housing,” she said at the offices of WNUC, a community radio station where she has a show. “All these incentives – corporate welfare.”

A city report from 2018 tallied public subsidies to Quicken, Bedrock and affiliated companies at US$766,759,061 since 2010. Of that figure, US$640-million came from direct government payments, calculated based on the tax revenues generated by the company’s projects, and the other US$127-million in the form of tax breaks. In one case, the company successfully lobbied the state government to set up a special fund for “transformational brownfield plans” so that Bedrock could apply for money from it.

By comparison, Detroit’s budget for public schools is US$767-million, and for public transit is US$137-million.

A ProPublica report last month, meanwhile, highlighted Mr. Gilbert’s efforts to build a relationship with U.S. President Donald Trump – including a $750,000 donation to his inauguration – alongside a Trump administration decision to grant a relatively wealthy swath of downtown Detroit a special tax status meant to help low-income neighbourhoods. That status could boost the value of Mr. Gilbert’s holdings.

The city requires developers to sign Community Benefits Agreements with the neighbourhoods in which they build, stipulating specific things the company must provide such as parks or affordable housing. But some activists contend these do not go far enough.

“If you talk to Quicken, they’re going to tell you that they’re doing something,” said Gloria Rivera, 76, an activist with the Detroit People’s Platform. “The question is, are you doing enough?”

Dileo Jones of Detroit plays violin across from the Shinola Hotel in downtown Detroit. Mr. Jones moved to Texas for two years but returned after he heard friends talking about the city’s growth. 'We used to be the richest city in America,' he says. 'Detroit still is but we just gotta get it together. The bodies are here and the talent’s here.'

Laura Grannemann, a Quicken vice-president who oversees the company’s charity programs, stands in the living room of a newly renovated house near Detroit’s northern boundary. The two-storey, three-bedroom brick home sticks out on the street, with its fresh coat of blue paint, polished hardwood floors and fireplace newly faced with stone.

This house is part of Rehabbed and Ready, a program in which Quicken fixes up foreclosed homes and sells them back into the market to raise long-depressed property values for the city’s homeowners.

Another Quicken program pays off the back taxes on foreclosed houses that had been owned by scofflaw landlords, and sells the properties to tenants living there for between US$2,000 and US$6,000. A third helps low-income families apply for property-tax exemptions in a bid to keep their homes.

“We have even more of a responsibility to be really active in that space, and we have a lot of talent to bear on this problem,” Ms. Grannemann said. “We have 17,000 team members who all, in some way, are touching housing-related issues.”

Mr. Cullen allows that Bedrock has focused nearly all of its efforts to date on the central business district and has more work to do outside of it. The company, he says, plans to push further into the neighbourhoods.

“Most of the great stuff that’s happened in the first five years of our resurgence is in seven to 10 square miles downtown, and the city of Detroit is enormous – it’s 140 square miles,” he said. “You can’t have 10 square miles of an ecosystem of 140 doing well and the rest of it failing and think that you’re going to be successful.”

The Shinola Hotel in downtown Detroit, the area where most of Bedrock's renovation efforts have focused so far.

But Mr. Gilbert’s team makes no apologies for tapping the public purse to help fund its work.

Jared Fleisher, his chief lobbyist, said Bedrock would never have built any of the projects that received subsidies without that money, because rents alone would have been too low to cover the costs of construction. The payments are a small price, he contends, for the additional tax revenue and economic development the properties are bringing in. The city’s numbers calculate that net tax from the projects, after subtracting the cost of subsidies, will be US$690-million.

“Gilbert is willing to take more risk with less return longer in the future than any traditional developer,” Mr. Fleisher said. “But that doesn’t mean he can go bankrupt. That doesn’t mean these developments can lose money.”

A report commissioned by the Michigan state government on the single largest Bedrock subsidy – a US$618-million package from the Transformational Brownfield Plan – found that Mr. Fleisher is correct, at least to a point. The study, by Chicago-based development consultants SB Friedman, calculated that revenues from the projects, without a subsidy, would indeed be too small to cover construction costs.

But the report also found Bedrock had significantly overestimated those costs. It recommended the subsidy be cut to US$346.5-million. Despite this advice, the state government approved the full US$618-million Bedrock wanted.

As for the special tax status conferred by the Trump administration on parts of downtown Detroit, Quicken contends it exerted no undue influence: All it did, Mr. Fleisher says, was take part in consultations with the city and state on which areas should be suggested to the federal government for the program.

Ms. Goss-Foster, the urban-affairs expert, said the subsidies have been “necessary,” but the city and state have done too little to extract benefits such as affordable housing and heritage preservation in exchange.

Rather than a divide between downtown and neighbourhoods, or Mr. Gilbert and community bootstrappers, she argued, all of these elements have to work together.

“There is no one king here that’s sprinkling gold and paving streets for opportunity,” she said. “We need everybody for that. We need all of the justice voices and we need the corporate leaders.”

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