Private activity bonds to fund Detroit mixed-use developments

The Michigan Strategic Fund board approved a plan to issue $150 million in private activity bonds on behalf of developer Bedrock TBP, Inc.'s Detroit development projects.

The April 28 vote cleared the way for Bedrock to continue with its transformational brownfield plan. The state incentive program uses tax increment financing to pay back developers for project costs.

The Series 2026 limited obligation tax capture revenue bonds will be offered via limited offering and the deal is expected to close by the end of the month, according to an April 28 memorandum.

Stifel is the lead manager on the deal and Miller Canfield is bond counsel.

The 13-member board of the MSF is part of the Michigan Economic Development Corporation, and has authority to spend state appropriations to foster business and community development, among other activities.

The MEDC is funded by tribal gambling revenues, state funding reimbursements, fees and investments, interlocal and other revenues, and corporate carryforward funding, according to its FY2026 advisory budget.

Under the MEDC's private activity bond program, private developers can borrow through a governmental unit ? the MSF ? for economic development projects found to serve a public purpose. The bonds are typically secured by project revenues.

The arrangement allows the private developer to benefit from the MSF's tax-exempt status.

"The revenue stream backing each bond issuance is dependent on that specific project," Danielle Emerson, public relations manager for the MEDC, said by email. "In this case, the bonds are backed by the revenue produced by Bedrock's TIF, not using state of Michigan funds."

The MSF is not seeking a rating on the bonds, she said.

In 2025, the MSF was the conduit issuer for three bond sales with a combined par value of $44.4 million, Emerson said.

She emphasized that the board vote gave Bedrock the authority "to utilize a private activity bond to support continued progress on its four TBP projects in the city of Detroit."

Bedrock, a commercial real estate firm focused on urban development, has offices in Detroit and Cleveland. It was founded in 2011 by billionaire Dan Gilbert to develop a portfolio that includes office, retail, residential, hospitality, parking, data center and industrial and development, with a focus on central Detroit and Cleveland.

Gilbert made his fortune in the mortgage business, with firms that have evolved into the Detroit-based Rocket Companies (RKT), of which he is board chairman.

In 2018, the MSF approved $618 million of transformational brownfield incentives for Bedrock.

The Bedrock Detroit projects were on the table in 2016, when state lawmakers passed bills to create the brownfield tax credit with a new category specifically for large-scale "transformational" projects that allow developers to capture sales and income taxes tied to the projects in exchange for a minimum amount of private capital invested.

The program at inception was projected to total $618 million in foregone tax revenue over approximately 30 years. At the time the plan was approved, Bedrock was planning to issue $250 million of bonds backed by the captured taxes.

The program was driven by the state's interest in helping Detroit recover from what was then the largest municipal bankruptcy after exiting Chapter 9 in 2014.

Tax increment financing was also used to develop and construct Little Ceasars Arena, the sports venue that opened in 2017 to house the NHL's Detroit Red Wings and NBA Detroit Pistons.

The plan approved on April 28 would authorize bonds to reimburse Bedrock for the costs of building four mixed-use projects, which were part of the original 2018 plan: the new Hudson's Detroit skyscraper; the Book Tower renovation; the One Campus Martius office expansion; and a new COSM immersive reality entertainment venue at Cadillac Square, according to .

Some of the projects, like the Book Tower renovation and the One Campus Martius expansion, are already completed.

The 100-year-old Book Tower, originally an office tower and once Michigan's tallest building, is now home to apartments, a hotel and restaurants.

The Hudson's Detroit skyscraper is slated for completion in 2027 with condominiums, a high-end hotel, offices, including the General Motors (GM) headquarters, and event space; the COSM immersive reality venue at Cadillac Square is projected to be built by September.

Bedrock did not respond to questions, including about reports by the Detroit Free Press that the costs of the unfinished developments have climbed from original estimates, with the Hudson's site price tag jumping to $1.5 billion from $900 million.

According to the memo, the bonds will be backed by multiple tax capture streams: tax increment revenues, income tax capture, withholding tax capture and sales and use tax capture.

Any tax capture revenues beyond those required to pay debt service will go to reimburse the developer for costs of construction and site improvements.

Debt service payments will be secured by an assignment of reimbursement agreement and pledged tax capture revenues, according to the resolution. U.S. Bank will serve as trustee.