Just because the option has been crafted doesn’t mean that a sale will happen.
In general, under a put and call agreement, there are two components: the “put” option, where the seller — in this case, GM, through Riverfront Holdings — can make the buyer — Bedrock, through its Resurgence Realty — purchase the properties spelled out in the document; and the call option, where Bedrock can make GM sell the properties.
If Bedrock’s option lapses, GM can require Bedrock to buy it, or the agreement can lapse entirely with no sale taking place.
There is sometimes a hard-money deposit by the prospective buyer that goes to the seller if a deal doesn’t take place, but whether there is one in this instance is not known. The notice says the agreement is valid until the property is sold, or the agreement is terminated.
Barry Swatsenbarg, an executive vice president in the Royal Oak office of the Colliers International Inc. brokerage house, said option agreements like the Bedrock/GM one can take a lot of different forms. For example, a tenant could negotiate an option to buy a building it occupies if it expands to a certain size.
“When you get to larger deals, I think actual put-call options probably get more common and, quite frankly, the Midwest doesn’t see $100 million-plus deals often. You see it in more major markets,” Swatsenbarg said.
“You have two big entities in that deal, with Bedrock trying to buy and GM trying to sell. They both want to protect their rights with an option contract of this size,” Swatsenbarg said.
This is at least the second time Gilbert and GM have been involved in conversations about the billionaire mortgage and real estate mogul purchasing the iconic but struggling office, hotel and retail complex built in the 1970s and 1980s on the Detroit River.
There had also been discussions in 2018, but a deal was never forged. Sources at the time to Crain’s that those talks did not advance far because the complex required substantial upgrades, including major overhaul of the HVAC system.
In April, when the GM/Hudson’s Detroit deal was announced, CEO Mary Barra, in response to reporters’ questions about potentially selling the RenCen, said the automaker is “working to decide what the right outcome is for the building.”
“We are embarking on taking the next year to work together with the mayor, Wayne County and Bedrock to imagine what it can be,” Barra said in April.
Construction of the complex was announced in 1971, as the city was still reeling from the July 1967 uprising that resulted in 43 dead, thousands of arrests and hundreds of buildings destroyed.
Built on a gigantic swath of Detroit riverfront land, it is essentially cut off from the rest of downtown by a 10-lane boulevard and surrounded by little else comparable on that side of Jefferson Avenue.
GM says it has pumped $1 billion into improving the RenCen and the Detroit RiverWalk over the years since it took ownership in the mid-1990s with its $73 million acquisition. Although the improvements, including the wildly popular RiverWalk, have changed that to an extent, the location still has taken its toll.
The automaker’s pending departure in 2025 will serve as another blow to the towers, which have experienced occupancy challenges for years — a problem exacerbated by the COVID-19 pandemic that sent millions of office workers home and has caused upheaval in the office market with ripple effects still being felt today.
In April, Bedrock and GM said they would embark on a roughly year-long process to determine the RenCen’s fate. It could be repurposed with other uses, or some of the buildings — or all of them — could be demolished.
Others at the table for those discussions include representatives from the city and county, which had been approached about potentially relocating its employees into a portion of the complex.
