State and City of Detroit officials have approved $6.1 million in economic development incentives to turn a 13-story residential hotel in downtown that recently housed lower and moderate-income tenants into an upscale Hilton hotel.
The development group, Downtown Hospitality Detroit LLC, is planning a $50-million overhaul of the old Park Avenue House, 2305 Park Ave., to turn it into a 172-room "Tapestry Collection by Hilton" hotel featuring a first-floor restaurant and a cafe.
The building would be renamed Royal Palm Hotel, which was its original name when it opened in 1924 as a Louis Kamper-designed property for prominent Detroit hotel developer Lew Tuller.
The building most recently functioned as a residential hotel and was known for its low weekly, biweekly and monthly rates.
In late 2018, after tenants in the Park Avenue House received 30-day eviction notices, city officials provided $350,000 in federal housing funds to the United Community Housing Coalition to help those individuals find new homes and get a six-month extension to the eviction deadline. There were about 70 residents in the building at the time.
More: City of Detroit plans to use $400,000 to help Park Avenue House tenants
More: Detroit hotel residents, many low-income, given 30 days to move
The evictions were initiated under the building's then-owner, Harrington Properties Inc., run by businessman Sean Harrington, whose parents purchased the property decades earlier. Harrington, who also owns the Town Pump Tavern and Hot Taco restaurant, couldn't be reached for comment Tuesday.
City land records show the hotel property sold to development group Downtown Hospitality Detroit in late January 2019. The sale price wasn't disclosed; the asking price was $15 million.
Incentives OK'd
On Tuesday, the Michigan Strategic Fund approved a $2.5-million Brownfield tax-capture plan to support Downtown Hospitality Detroit's project. Previously, the city approved the project for a 12-year tax abatement known as an Obsolete Property Rehabilitation Act exemption, valued at $3.6 million.
A financial consultant for Downtown Hospitality Detroit said in a phone interview that the group was initially unaware that there were residents in the building, and once they purchased the property, allowed them to stay there rent-free while the housing coalition tried to find them new homes.
"They walked into (the deal) thinking it was just a hotel. They had no idea there were long-term residents there," said John Hambrick of St. Clair Shores-based JGH Consulting.
"So here they are getting ready to finalize the acquisition, and (the previous owner) slaps everybody with these evictions, which they really had no idea," he said. "So they were like, 'Whoa, we don’t want to do that. Let’s work with these people and get them in safe, affordable, clean housing.' So they simply let everybody stay, kept all the utilities on, and didn’t charge anybody a dime for six months.”
The development group didn't receive any of the city's $350,000 funding contribution, Hambrick said, which instead went toward the tenants' relocation expenses.
"It ended up costing (Downtown Hospitality Detroit) $400,000 out of their pockets to keep the building operational for the six months to get everybody relocated," he said.
Hambrick said the group anticipates that the coronavirus crisis will be over by the time the new Hilton hotel is ready to open in early 2022.
"The developers are bringing over $8 million of their own equity into the property with a 6% (anticipated) return on their investment — that’s how much they believe in the city of Detroit," Hambrick said. "It is kind of risky, but they’re just very excited to be part of the rebirth of the city.”
Downtown Hospitality Detroit is composed of Anthony Yousif, founder of metro Detroit-based L.A. Insurance and a member of AY Lodging LLC; Mike Abdulnoor, also with AY Lodging, and Mario Keizi of Ark Hospitality, according to Michigan Economic Development Corp. records.
The three men have years of experiencing building and operating hotels, the MEDC says, and constructed and redeveloped more than 300,000 square feet of commercial, industrial and retail properties throughout metro Detroit.
The hotel is expected to create 65 full-time jobs once it opens, and a hiring preference will be given to Detroit residents.
“We will be accepting their resumes first and interviewing all Detroiters first," Hambrick told members of Detroit City Council's Planning and Economic Development committee last month.
Contact JC Reindl at 313-222-6631 or jcreindl@freepress.com. Follow him on Twitter @jcreindl. Read more on business and sign up for our business newsletter.
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