Finley: Quicken IPO a red flag for Detroit

For a decade, Dan Gilbert has bankrolled downtown Detroit’s revival out of his own wallet, making low-return bets on crumbling buildings that otherwise might have been torn down.

It’s an altruistic investment strategy he can indulge because, he told me once in an interview, it’s his money, and he can do what he wants with it.

As he said, if it takes 100 years for the money he plants in Detroit to bear fruit, so what? His hugely profitable Quicken Loans empire is privately held, so he doesn’t have to explain his moves to a board, nor worry about quarterly earnings reports or daily stock prices.

In other words, he’s had the freedom to save Detroit.

That may be about to change, and it could have a tremendous impact on the pace of Detroit’s ongoing rebuild. 

Gilbert announced this week that he is taking Quicken public, filing paperwork for an initial public offering for the nation’s largest mortgage lender.

The IPO will still leave Gilbert with a controlling interest in the company. In the beginning, at least, he will continue to be the string puller. 

Although the Bedrock real estate arm is not part of the IPO, it is Quicken that generates most of the empire's revenue, and those dollars give Gilbert more flexibility with Bedrock investments.

Much changes when a private company goes public. 

Shareholders have different expectations than family members. They’re not likely to be as comfortable with 100-year timelines for investments to pay off. 

Money that has been available to fund skyscrapers on speculation or save rotting buildings from the wrecking ball will compete with the need to fatten dividends and boost stock prices.

There will be more scrutiny, both from investors and federal securities regulators, and more people asking "why?"

His success will be judged not by what he's doing on the streets of Detroit, but by how he’s received on Wall Street.  

Though the IPO is structured to give Gilbert maximum control, ultimately investors will want more say, and will gain more leverage. 

Entrepreneurs who think they can go public with their companies and still operate them as private enterprises are nearly always disappointed. Look at what happened to Pete Karmanos, who stayed on as chairman after Compuware went public and was eventually driven out of the company he founded.

The Quicken IPO is a red flag for a city that has become so dependent on Gilbert.

He may not be as free to make risky gambles on Detroit. Or so quick to write a check to fund a wide array of civic projects.

Questions about the 58-year-old Gilbert’s ongoing involvement in Detroit have been top-of-mind since he suffered a stroke a year ago. It’s still unknown whether he’ll ever return as the visible force he once was. 

The departure from his empire last week of Matt Cullen heightens the concern. 

Cullen has been the visionary of Detroit’s comeback for a quarter of a century, first as General Motors’ real estate chief and then as Gilbert’s right hand on development. He’s off to build his own casino operation in Ohio, and with him goes a powerful advocate for the city.

Detroit has known it can’t depend forever on one man to keep it afloat. Gilbert has done more for Detroit than perhaps any private individual in the city’s history. 

But the Quicken IPO and Gilbert’s ongoing health issues should spur Detroit to broaden its field of saviors.

Twitter: @NolanFinleyDN

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