Hudson's cost overruns mean Gilbert could max out public funding for project

August 24, 2022, 10:56 AM

Hudson's site rendering.

Detroit's elected leaders approved $60 million more in public incentives for Dan Gilbert's Hudson's skyscraper this summer in response to cost overruns that were blamed, at least partly, on the pandemic and more expensive supplies.

A month after City Council's approval of the funding, we have a more thorough accounting of why costs increased from a 2018 estimate of $909 million to $1.45 billion. It was reported by the Free Press and based on analyses conducted by Chicago consultants and University of Michigan economists:

Many items in the experts' reports have not been previously reported, such as how Gilbert's Bedrock real estate firm was hit with nearly $100 million in additional architectural fees following numerous design changes for the project that is still under construction after its December 2017 groundbreaking.

What's more, because of the growing costs and high perceived risk in the eyes of lenders, Bedrock had to put up more equity than is typical for such developments.

Other new costs weighing on the project's budget are furniture, fixtures and equipment expenses ($31 million), marketing expenses ($14 million) and various consultant fees.

Design changes have included adding and then shaving floors off the skyscraper, which was at one point slated to be Detroit's tallest.

Though the reports were compiled earlier this year, they were released only yesterday by state development officials as they approved changes to $618 million in other public funding already approved for the project and others nearby.

The Detroit News explains how those changes could yield even more public investment in the Hudson's site:

The amendments don't increase the nearly $308 million maximum amount of income and withholding tax captures Bedrock Management Services LLC is eligible to receive for its Hudson's development, One Campus Martius expansion and redevelopment of the Book Building and Book Tower. They, however, do mean Bedrock will have a better chance at hitting that maximum.

Read more:  Detroit Free Press

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