by Andrew Koper

Larson Realty Group sprang onto the Detroit redevelopment scene in 1999. With its Madison Theater/Post Bar and Eureka Building projects, Larson is one of the few companies rejuvenating downtown Detroit.

Eric Larson is the CEO and president of the small, full service Bloomfield Hills-based real estate company. Before starting Larson, Eric worked for Bruce Brickman & Assoc. repositioning 150 W. Jefferson. Before that, he was a vice president at Hines, where he ran the firm's 140 person Detroit office, established the firm's advisory relationship with GM, coordinated GM's purchase of the Renaissance Center and Millender Center, directed Hines's more than $2 billion redevelopment of these properties, directed the management and leasing of Comerica Tower, and provided advisory services to the Detroit Medical Center. Eric is also chairman of Detroit Downtown, Inc., vice chairman of the Detroit chapter of the Urban Land Institute (ULI), a board member of the Parade Company, and more.

If that Detroit experience wasn't enough, the other thing that makes Larson Realty Group unique is its non-executive chairman, Robert Larson. Bob is Eric's father, and he had a career at Taubman Centers, the Bloomfield Hills based national developer of shopping malls with $341 million in revenue, which he ran before he retired from the company a couple of years ago. Now Bob is a managing director and chairman of Lazard Freres Real Estate Investors, LLC. Lazard is a global provider of financial services. He also has roles at several other large real estate companies based in the U.S. and Britain, was the founding chairman and is currently a director of the Greater Downtown Partnership (GDP), and holds many senior volunteer/philanthropic positions in the community.

Larson Realty Group has holdings in the suburbs such as the 301 E. Liberty office building in downtown Ann Arbor, Oxford Mills Shopping Center in Oxford, the Onyx Plaza office building in Southfield, an industrial park in Warren, and Ace/Dunham's shopping center in Orion.

The following is a summary of what Eric said about Larson Realty Group and what it is doing in Detroit.

When Eric left Hines, he wanted to take the experience and education he had gotten working on large scale, complex projects and apply it to small and mid-sized projects. His dad was supportive of the move, and they have been able to combine their different real estate backgrounds - office and retail - into a great partnership. Eric runs Larson Realty Group, and "small," "entrepreneurial," and "professional" are words he frequently uses to describe the company.

When Eric started the company, he got together with Skidmore, Owings and Merrill (SOM), the GDP, the Downtown Development Authority (DDA), and the City of Detroit to determine where the logical path of growth would occur in Detroit. Based on this, he decided to focus on Broadway, and in particular, the block between Grand Circus Park and John R. With SOM, and then also with Birmingham, MI based McIntosh Poris, they determined which of those properties could be repositioned, and then began a campaign to reach out to those property owners.

One of the most challenging aspects of doing a redevelopment project in Detroit - one of the reasons there are so many vacant buildings downtown - is property owners who want a lot of money for their property. "The challenge in Detroit is that there are a number of owners who look to their real estate assets as their nest egg - their retirement fund," Eric said, "and in some cases the pricing expectations are higher than what the current market will support. We spent a lot of time with two owners on Broadway, both of whom have buildings that are completely obsolescent, but they believe they are worth as much as ten times as what the market will bear."

"So you've got to get creative," said Eric. He looked at projects that had some form of city involvement - city ownership or city financing - or that maybe the city could help by encouraging a change of ownership. He reached out to building owners about purchasing their buildings or at least partnering on their buildings. I.e., he brings the real estate, financial and construction expertise, and they bring the property ownership so they "have some participation in the upside to the extent that it occurs down the road after you pay off all of your debt and equity and achieve a reasonable rate of return."

The first building they were able to "move forward on" was the Madison Theater (see picture), located at Grand Circus Park on the corner of Broadway and Witherell. Larson purchased it from the Detroit Opera House and the DDA. (Larson had also been involved in discussions about the David Whitney Building before.) It was built in 1917, had 20,000 sq. ft. of office space, a 20,000 sq. ft. theater, and had been vacant for 20 years.

The original plan was to mothball the 1,600 seat theater, "re-energize" the retail frontage, and build live/work lofts in the five story office space, but as they got into the building, they realized the theater was beyond salvage so they had to revise the plan. Larson tore the theater down, left the front office structure, and divided the 20,000 sq. ft. plot into two parcels. The front will be a 60,000 sq. ft. project with a Post Bar and three floors of office space. There are conceptual plans for a 12 story building with 25 condo units on the rear 10,000 sq. ft. pad.

Eric is concerned about how in the past, projects have been announced prematurely. He is averse to doing that, but he says the condo building will cost $250 to $300 per square foot and that currently the market will only support condo sales in the neighborhood of $200 per sq. ft. But he expects that to change "very quickly."

Larson's next project was the Eureka Building (see picture). This five story building is on Broadway, down a little from the Madison Theater, and was built as the headquarters for the Eureka Vacuum company. The restaurant "Small Plates' operates on the first floor, and the upper four floors are lofts. There is a white marble entryway, the original glass door elevators, chrome and pewter fixtures, natural hardwood and polished black stained concrete floors, track and recessed lighting, custom maple cabinets, stainless steel appliances, and more. The smallest loft is 1,290 sq. ft. and rents for $1,550/month; the largest unit is 1,560 sq. ft. and rents for $2,000/month. He bought the building from a teacher at Cass Tech.

The next project Larson is doing is the Metropolitan Building. This is the vacant building with the beautiful art deco decorations on the top floors on John R, around the corner from Broadway. It is a "great opportunity" with 100,000 sq. ft. and "a floor plate plan that lends itself to residential." The plan calls for 70 to 80 residential lofts.

There is one other project Larson is working on but it is not far enough along on to comment on.

Larson continues "to be interested and excited about downtown, especially from a residential standpoint." He calls the current office and retail markets "non-existent." He's leasing his units for $1.25 per sq. ft. which is "suburban level rents, and we have more demand then we can support."

He describes working with the city as "a great experience" and says the Archer and Kilpatrick administrations have been very supportive. He suggests that the city has room to improve in how it handles the state's obsolete building legislation (which caps real estate taxes on obsolete buildings at pre-development levels for 10 years), that the city not jump from trying to develop one area to another without finishing the first area, and that better code enforcement on vacant buildings could facilitate more development being done.

Eric Larson is optimistic, pragmatic, and knowledgeable about development downtown. Larson Realty Group is doing smart, sensitive rehabilitation projects that subscribe to many of the principles Cityscape Detroit stands for. It will be interesting and important to see what they do in the future.