A Developer Bets on Detroit
By Giving Old Hotel a Facelift
Mr. Ferchill Fought
For Investors, Tax Breaks;
Eisenhower Slept Here
By MIKE SPECTOR
June 1, 2007; Page A1
Wall Street Journal
DETROIT -- This city's auto industry currently faces a historic meltdown. The real-estate market is so distressed that many houses here are cheaper than cars. A population flight to outlying suburbs -- a trend that began four decades ago -- continues, rivaling the exodus from hurricane-ravaged New Orleans.
So why is an out-of-towner named John Ferchill betting on a $180 million plan to turn an old hotel here into a deluxe destination with four-star rooms and luxury condominiums?
Since 1984, the 33-story Book-Cadillac hotel has stood gutted and abandoned on a downtown block surrounded by dormant storefronts and vacant buildings. Mr. Ferchill plans for it to open in the fall of 2008 as a 455-room Westin. The top eight floors will house 67 upscale condo units, most of which have already been sold. Penthouses commanded as much as $1 million.
A 65-year-old developer from Cleveland who specializes in risky markets, Mr. Ferchill has made a fortune restoring historic buildings in troubled cities such as Buffalo and Pittsburgh. But downtown Detroit is his most audacious bet yet.
"I've got a lot on the line here," says Mr. Ferchill, whose company has assumed more than $80 million in loans and other debt associated with the project. "I'm counting on the city of Detroit reviving itself in a manner that nobody expected to happen."
Last year, Detroit posted one of the highest unemployment rates in the nation, at 13.7%. Rampant crime, crumbling residential neighborhoods and troubled schools have long plagued the city.
But Mr. Ferchill thinks the start of a turnaround is already under way, as the city's new ballparks, casinos and multimillion-dollar housing developments have begun to lure more tourists and investors.
Many view the Book-Cadillac as a bellwether for any possible downtown revival -- especially for the city's long-neglected west side. "The Book-Cadillac more or less tests the water as to whether or not a significant renewal will take place," says John Mogk, an expert on Detroit history who teaches land-use and urban development at Wayne State University's law school.
Brothers J.B., Frank and Herbert Book opened the property in December 1924. The spot: the site of the old Cadillac hotel, which had been named for Antoine de la Mothe Cadillac, a French fur trader who founded Detroit in 1701.
At the time, Detroit was thriving and home to a new booming auto industry. The city's richly ornate, Gilded Age architecture had earned it the nickname "Paris of the West." With their hotel, the Books wanted to transform downtown's Washington Boulevard into a kind of Midwestern Fifth Avenue. It was Detroit's tallest building and the tallest hotel in the world.
The Book opened amid huge fanfare. More than 2,000 guests descended and 3,000 more had to be turned away. Large crowds spilled onto Washington Boulevard when celebrities arrived, Eleanor Roosevelt and the New York Yankees among them. The hotel's lush Venetian lounges and ballrooms were main draws, places to be seen in and hold important meetings.
On May 2, 1939, Lou Gehrig, suffering from unexplainable weakness and decline in his play, pulled Yankees manager Joe McCarthy aside in the Book-Cadillac's lobby. The two headed to Mr. McCarthy's room, where Mr. Gehrig told his manager he intended to sit out that afternoon's game against the Detroit Tigers. The decision ended Mr. Gehrig's consecutive-games-played streak at 2,130.
In 1951, the Sheraton hotel corporation bought the Book, renaming it the "Sheraton-Cadillac." Among its guests: Presidents Truman, Eisenhower and Kennedy. Sammy Davis Jr. and Frank Sinatra met at the hotel for the first time there, historical preservationists say.
For two decades, business in both the city and the hotel remained robust. But even during the 1950s and 1960s, changes were taking place that would precipitate decline. Interstate highways began to cut through downtown neighborhoods. Obsolete manufacturing plants couldn't be expanded in the city's industrial areas because they backed up against crowded neighborhoods. So factories moved to Detroit's outskirts.
Middle-class residents fled the city after violent race riots in the late 1960s and stopped coming downtown to see lawyers, doctors and other professionals. Detroit tried to rescue its scarred downtown in the late 1970s with the construction of four office towers, known as the Renaissance Center. But most of the complex's success came from peeling away businesses from the city's west side, near the Book-Cadillac. The unintended effect: Many west-side buildings were emptied, and restaurants and other businesses there declined. The Book suffered, too. It changed ownership several times between 1975 and 1980, when occupancy rates slumped.