Magic Johnson joins effort to rebuild Detroit

Posted on July 22, 2011

Detroit —NBA Hall-of-Famer and businessman Earvin “Magic” Johnson is returning to his Michigan roots, committing to invest millions of dollars in Detroit-area startup technology companies.

The Lansing native said Thursday he will be joining forces with Dan Gilbert and Detroit Venture Partners who are working to revitalize downtown Detroit and plans to invest in Detroit real estate with Gilbert.

Johnson is pouring millions of dollars into the venture capital firm that invests in early-stage technology companies. Detroit Venture Partners was founded in 2010 by Gilbert, founder and chairman of Quicken Loans Inc. and majority owner of the Cleveland Cavaliers; Josh Linkner, founder and chairman of ePrize and managing partner of Detroit Venture Partners; and Brian Hermelin, founder and chairman of private equity firm Rockbridge Growth Equity.

“We have so many talented people who live here, young people, but what we’ve seen in years (is) that talent is leaving this great state because they don’t have opportunities that are created here for them,” Johnson said during a news conference at the Compuware building, where Gilbert’s Quicken Loans is headquartered. “We want to create opportunities for them.We want to keep the talent right here.”

Johnson’s friendship with Gilbert and a promise to longtime friend and mentor Detroit Mayor Dave Bing led him to Detroit Venture Partners. After Bing was elected, Johnson said Bing asked him when he was going to invest in the city. Johnson said he kept the promise after finding a like-minded business partner in Gilbert.

“The only reason I’m a businessman is because of Bing Steel,” Johnson said. “He set the example that you can wear the little tight shorts and from that you can also wear a suit and become a businessman.”

Johnson, whose Beverly Hills, Calif.-based Magic Johnson Enterprises firm launched in 1987, has brought Starbucks Coffee Co., T.G.I. Friday’s restaurants, health clubs and movie theaters to urban areas. Johnson also may partner with Gilbert on real estate deals in Detroit, though the parties aren’t talking specifics.

Name recognition a draw

Gilbert — who wants to attract more technology and Web-oriented jobs downtown — has bought or signed purchase agreements for four downtown buildings. He also has been a major player in downtown’s revitalization — moving Quicken Loans’ headquarters and 1,700 employees from Livonia to downtown last year — with promises to bring another 2,000 in the future.

Adding Johnson to Gilbert’s investment mix should help downtown redevelopment plans happen more quickly, said Leo Phillips, a partner in the redevelopment of the Fort Shelby Hotel and who is working to develop the former Detroit Free Press building.

“Activity creates interest, and interest creates people buying things or deciding maybe they should have offices downtown,” he said.

Sandy Baruah, president and CEO of the Detroit Regional Chamber, said Johnson’s name recognition is likely to spur other private-sector investment in Detroit.

“It adds to this growing momentum that’s clearly happening in Detroit,” he said. “It is bolstering what Dan Gilbert is leading, what is really the private-sector investment confidence in Detroit. Magic Johnson has a very strong record in investing in kind of underserved areas and making a difference, a positive difference.”

Johnson’s business efforts

Johnson has launched business efforts in Detroit in the past. Some got off the ground, and others never materialized.

His firm partnered with Starbucks Coffee Co. in 1998 to open more than 125 urban coffee opportunity stores over several years across the United States, including in Metro Detroit.

Five of those stores were in Detroit, Dearborn, Southfield, Eastpointe and East Lansing, a Magic Johnson Enterprises spokesman said. Some stores remained open at the time Starbucks purchased the company’s 50 percent interest last October, according to Magic Johnson Enterprises.

The partnership created more than 2,100 jobs and contributed almost $30 million in salaries, wages and benefits in communities such as Detroit, according to Johnson’s firm. In 2010, Johnson’s sale of his Starbucks partnership and his shares in the Los Angeles Lakers netted him more than $100 million.

For years, Johnson tried to open a movie theater in the city and at one point in Harper Woods, but his efforts failed.

Emmett Moten, a developer who worked with Johnson on a deal to bring a movie theater in the early 1990s to Woodward Avenue in Detroit, described Johnson as an excellent businessman.

“They couldn’t get all the city land pulled together at the time,” said Moten, who then worked for the Ilitch organization. “He’s always been a strong champion for Detroit.”

Johnson said combining the public and private sectors is essential to rebuilding Detroit.

“I love to win, and I’m going to tell you this — I love to win with my money, too,” Johnson said after the news conference.

Detroit Venture Partners has funded six companies that have created about 50 jobs to date. One of them is Detroit Labs, an iOS and Android development company that, with the venture firm’s help, hired 12 employees.

The venture firm plans on financing six more companies this year, two in the next 30 to 45 days, Linkner said.

“It’s not just the capital that we’re going to bring to the table,” Johnson said. “Also we’r going to bring added value. We’ll teach them, show them, how to be more successful with their company.”

By Melissa Burden and Andrea Rumbaugh, The Detroit News