Demolition countdown begins for Detroit's Joe Louis Arena

The City of Detroit has until May to start demolition work for now-empty Joe Louis Arena with a goal of getting the land ready for a new, large hotel that would reshape the downtown riverfront.

That deadline is laid out in a 3-year-old agreement between the city and one of its former bondholders, which received future ownership and development rights to the arena property in exchange for accepting big losses during Detroit's 2013-14 municipal bankruptcy.

The deal requires the city — which built and still owns The Joe — to begin the demolition process within 90 days of the expiration of the arena's long-term lease with the Red Wings and the Ilitch family's Olympia Entertainment.

The lease was initially expected to end by mid-September 2017, according to the agreement and city documents, yet didn't expire until Wednesday because Olympia exercised options for time extensions. Work crews were spotted in recent weeks removing material from the 38-year-old, windowless building. 

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Under the timeline laid out in the agreement, the city now has until May 1 to get demolition under way, or, at the minimum, begin "staging for the demolition." 

The city will then have a full year to finish tearing down The Joe.

City spokesman John Roach said Friday that city officials in coming months will start preliminary demolition-related work, such as environmental surveys of the arena site. However, "mobilization for the knock-down phase" won't happen by the 90-day mark in May, he said.

Detroit has yet to determine when and how it will take down the arena, including whether any explosives will be used, such as were employed at the Pontiac Silverdome, Roach said.

But once the arena is gone, the city is to hand over the 5-acre site (plus that of the nearby 3,200-space Joe Louis Arena garage) to its former bondholder, the Financial Guaranty Insurance Co.

The company will then have a year under the agreement to start constructing a new "first-class" hotel on the former arena site, adding a new lodging option for Cobo Center conventioneers.

This riverfront hotel is required to have up to 30 floors and at least 300 rooms. It could also be joined by additional development, such as offices, apartments, restaurants and retail stores, the agreement says.

So far, there are no official proposals for the hotel development, Roach said.

A representative for the Financial Guaranty Insurance Co. did not return repeated messages this week. The firm swallowed big losses during Detroit's Chapter 9 bankruptcy, receiving about 13 cents on the dollar for its $1.1-billion claim against the city.

The city is to be reimbursed for the arena's demolition costs through up to $6 million in loans from the state via the Community Revitalization Program. Details on the loan terms were not available Friday.

State officials have also pledged to reimburse the insurance company for up to $18 million in hotel development costs, including through tax-incremental financing, the agreement says. 

Additionally, local property taxes for the hotel development could be frozen and not account for the hotel development for up to 10 years.

Joe Louis Arena opened in December 1979 and was home to four Red Wings Stanley Cup championship teams and more than 600 concerts and events.

The city built the $34-million arena to keep the Red Wings, then owned by the Norris family, from leaving Detroit for Oakland County.

The Wings played their final game at The Joe last April 9, a 4-1 victory over the New Jersey Devils. They now play at the new $863-million Little Caesars Arena.

Contact JC Reindl: 313-222-6631 or jcreindl@freepress.com. Follow him on Twitter @JCReindl.