DETROIT – It was late Friday afternoon before Labor Day weekend when Fernando Palazuelo reached the head of the line at the tax collection window of the treasurer’s office in Wayne County, Mich.
He had traveled 3,700 miles from Lima, Peru, to make a simple request.
“I am interested in buying the Packard plant,” he said. “And I want to speak to the man in charge.”
A few minutes later, he was ushered in to see Raymond Wojtowicz, the 84-year-old county treasurer responsible for tens of thousands of foreclosed properties in the bankrupt city of Detroit.
And with that, Palazuelo, a developer of broken-down buildings from Europe to South America, was on his way to buying the biggest, most iconic eyesore in this city – the abandoned Packard Motor Car plant.
There are risky bets in commercial real estate, and then there is the Packard – vacant, vandalized and deteriorating for decades.
Yet Palazuelo’s acquisition of the sprawling, 40-acre Packard site Dec. 31 is part of the unlikely land rush occurring in Detroit, where investors from around the world are scrambling to buy vacant properties at the bottom of a historically distressed market.
Detroit’s empty buildings have lured buyers from all over, like the Chinese firm that last year bought two office towers from a Florida company, and the individual investors from Europe and Asia who have scooped up derelict homes for less than $1,000 each.
But no deal has captured the city’s attention like Palazuelo’s purchase of the Packard.
He won a county-run auction to buy the dilapidated plant for $405,000 – less than 15 cents a square foot for a trash-strewn, graffiti-covered hulk of industrial decay in the heart of a profoundly blighted neighborhood.
He was not the first to try to acquire it. Two other potential buyers, an Illinois developer and a Texas doctor, submitted higher bids but failed to come up with the money.
But Palazuelo’s $405,000 is now in the county treasury and is nonrefundable. It represents a small down payment on the $350 million he says he needs over the next 10 years to transform the Packard into a successful, mixed-use development.
The odds against him do not faze Palazuelo, who is trying to raise capital for the project from business contacts in the United States, Europe and South America.
“I am a real estate developer but a very special one,” he said. “I have always been entering cities that have problems in the past.”
His ambition to own the plant surprised even Wojtowicz, who in 37 years as county treasurer had heard his share of wild ideas for redeveloping the ruins of Detroit.
“It was spontaneous and unexpected,” Wojtowicz said. “But the proverbial seed was planted because of his sincerity.”
Detroit’s development community is intrigued by Palazuelo’s strategy to methodically rebuild parts of the Packard over time.
“It is a lot of money, but any building that size is going to cost a lot,” said Dan Pitera, an architecture professor at the University of Detroit Mercy. “But it has possibilities if you do it one piece at a time.”
Palazuelo’s personal odyssey makes him a fitting candidate to take on such a gamble.
He made a fortune converting abandoned buildings into art galleries and apartments in his native Spain, only to lose everything in the recession of 2008. After filing for bankruptcy and on the heels of a bitter divorce, he moved to Lima to start over, drawn by the abundance of cheap, available property in the Peruvian capital.
Then in July, Palazuelo read in the local newspaper that Detroit had filed for the largest municipal bankruptcy in U.S. history and immediately sensed a once-in-a-lifetime opportunity.
He could not have picked a more problematic place than Detroit, home to an estimated 78,000 abandoned buildings including the decrepit Packard plant.
Palazuelo, silver-haired at 58 years old, stopped by the plant during a recent weeklong visit to Detroit to meet with city officials and potential investors in his long-term plan.
“So many people have said to me that this is the very last place I want to be investing money,” he said. “But for me, Detroit is my new home.”
Palazuelo’s company, Arte Express, has revived about a dozen older properties in Lima for banks, insurance companies and other businesses. Several of the buildings had been vacant for decades but were of historical significance.
“It’s a positive contribution to the aesthetics of this part of town,” said Julian Corvacho, a lawyer with the real estate arm of the Lima municipal government. “The revamped properties also have attracted companies that have come back downtown to operate.”
Palazuelo faces a long process to determine how much of the plant is structurally sound enough to use. Pitera, who is involved in a municipal planning project called Detroit Future City, suggested that new buildings could be constructed within the Packard’s aged walls, similar to how old factories have been revamped in Germany and elsewhere.
Another urban expert, Thomas Sugrue, compared the Packard to the defunct Bethlehem Steel complex in Pennsylvania, which was partly converted into a casino.
But even that project pales in comparison.
“I don’t know of any successful attempt to adapt and reuse a facility as decrepit as the Packard,” said Sugrue, a Detroit-born historian and author of the book “The Origins of the Urban Crisis.” “It would require a staggering investment to bring even part of it back to life.”
Palazuelo is, for now, taking stock of the task ahead. He has talked with county and city officials about improving nearby streets and lighting and possibly providing tax incentives for investment. And he has hired private security to patrol the grounds, as he considers ways to secure the property from trespassers.
As he toured the second floor of one of the Packard’s buildings, Palazuelo said his initial goal was to clean up the plant in sections and build an on-site corporate office and an apartment for himself.
Then he will see which of his prospective tenants are genuinely interested in moving in. He said that, so far, a large auto supplier has looked at leasing space, as well as a local liquor distillery. Other plans include possibly building an indoor go-kart track.
“We will start work,” he said. “And then see who wants to follow us.”