Saving a landmark
In 1927, as an ode to the American work ethic, the Fisher brothers, who had created the largest manufacturer of automobile bodies in the world, Fisher Body Corporation in Detroit, hired legendary architect Albert Kahn to create a magnificent building as a thank you to the city. Completed in 1929 and considered one of Kahn’s masterpieces, the ornate, art-deco-inspired, 30-story Fisher Building would become a National Historic Landmark in 1989, cited as a “superbly designed complex which displays some of the finest craftsmanship in any Art Deco style building constructed in the U.S. in the 1920s.” With hundreds of thousands of square feet of retail, office, and dining space, soaring, elaborately decorated common areas, and the also magnificent Fisher Theatre, the complex had indeed become iconic.
Fast forward to 2015, however, and the realities of time were intruding. The building was nearing a bank foreclosure and in need of significant restoration inside and out. A sale was held on the Fisher Building and nearby properties including the less grand but also iconic Albert Kahn building, a multistory parking structure, and two surface parking lots. A group with a long history of aiding the resurgence of Detroit won the right to acquire the building from another alternative lender, and although they would pledge a first-loss position and maintain sufficient equity throughout, there were several complications that a financier would need to look through carefully in order to provide financing, despite the sponsors already having made significant investments in the project.
One of those complications: The lead bank in the transaction backed out after its existing loan was modified and amended eight different times in less than three years. Another: There was quite a bit of redevelopment activity, including infrastructure repair and mass transit development, planned for the area (whose hub is the Henry Ford Hospital System and which includes extensions of the Henry Ford campus and a Detroit Pistons performance center), but most such projects were still being proposed or had just gotten underway—and meanwhile, the once-fashionable and in-demand Fisher Building was only about 50% occupied.
Nonetheless, in a period of just a few days, Arena and our lending partner saw what was possible with the opportunity to buy and amend the existing loan such that the borrower could immediately start certain modifications and improvements in parallel. Further, we would tranche the loan such that future proceeds would be released only as the borrower completed certain capital improvements and brought the building’s metrics to the point where other financing solutions might also become available. All of this was ambitious but well within the capabilities and resources of the experienced players involved—and given their other holdings in the area, they were highly incentivized to make this project a success.
As is common with Arena, our involvement required high performance by the counterparties to allow the funding to play out as structured, but also as is common with Arena, there was a more than adequate potential path for their success. And, of course, there was more than adequate value backing up Arena’s initial loan amount to protect us, should we have had to step in.
We are pleased to note that this loan has proven to be a success for all parties involved, with the Fisher Building having had meaningful improvements to its interior and facade, including painstaking restoration of some of the decorative works, a new HVAC system, new fire safety system, modernized elevators, and significant parking expansion to support future leasing of office and retail space. The leaseout level has risen significantly. The building has already won numerous new awards including being named a 2020 Travelers’ Choice award winner by Tripadvisor. Helping current and future generations of Detroiters (and visitors) enjoy this wonderful asset is a transaction we are proud to have supported.