E.L. project developer faces financial woes
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An East Lansing-based development company in charge of a major downtown overhaul is facing financial problems across Michigan and in other states.
Strathmore Development Company, the developer behind East Lansing’s City Center II project, is up against various foreclosures and unpaid property taxes for several developments inside and outside the state.
City Center II is a $116.4 million mixed-use downtown development slated for the corner of Abbot Road and Grand River and Evergreen avenues.
Recently, seven properties that are a part of the City Center II project went into temporary foreclosure because of unpaid property taxes and defaults on a loan agreement, said Eric Sanko, vice president of special assets of Huntington National Bank.
This is not the first time this has happened to Strathmore. A development in Bear Creek, Mich., went into foreclosure in March. Emmet County documents show National City Bank filed for foreclosure against Strathmore’s Bear Creek properties.
“This is a project unrelated to City Center and part of an overall restructuring of the National City Bank debt that has been settled and is in the process of closing,” said Scott Chappelle, the head of Strathmore Development Company, in an e-mail.
Other documents from Emmet County show Strathmore owes more than $51,000 in property taxes for part of the Bear Creek development, with some delinquencies dating to 2000.
The Bear Creek development has experienced problems before the 2009 foreclosure. The company placed lawsuits on both the township and the sewer authority of Bear Creek, citing it had faced delays in obtaining land-use approvals and sewer connections. The sewer authority was dismissed in the fall as having done nothing wrong, said Stephen Tresidder, an attorney representing the sewer authority. However, the decision is being appealed and will go to the Michigan Court of Appeals.
“Nobody’s ever found that we inappropriately delayed anything once we knew we had to extend the capacity by the time it needed to be extended,” Tresidder said.
Chappelle sent out a press release Wednesday that stated many of the company’s projects are going well, and some have come to fruition. The release included a passage stating Strathmore had completed the construction and delivery of a municipal water well project for the city of Petoskey. However, Alan Terry, Petoskey’s acting city manager, said Wednesday the company has a water well the city is interested in buying but has not purchased.
“It’s a well he had drilled years ago and we are looking to purchase it from him,” Terry said. “We have not bought it, no.”
Chappelle said he closed on the deal with the Petoskey City Council on July 22. He added that anyone in the city who did not know of the deal was uninformed.
“The terms of the purchase are outlined in various meetings of the Petoskey City Council,” Chappelle wrote in an e-mail.
Elsewhere, the company faces other foreclosure woes. In Bonita Springs, Fla., a shopping center faced two foreclosure suits earlier this year. Tax records from Lee County, Fla., show the company owes a combined $53,520 for both 2007 and 2008 property taxes.
Strathmore bought the center to remodel it, but Bonita Springs Planning and Zoning Manager John Dulmer said the project has stalled.
“I don’t know what their plans are, but they haven’t gone forward,” Dulmer said.
Another stalled project is an Ann Arbor development, Broadway Village. The development broke ground in January and has not moved forward. Ann Arbor City Planner Alexis DiLeo said the proposed project called for specific zoning requirements.
“It was complicated, but most of those issues were all eventually worked out and it was approved,” DiLeo said. “Someone else could still come in and start the site and start building.”
Despite all this, East Lansing officials expect ground to break on the City Center II project sometime this fall.
“It’s clearly been delayed a little by the financial state we’re in,” City Manager Ted Staton said.
Commentary
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Lyle
(07/23/09 6:35am)Report
I foresee a partially completed project creating an eyesore downtown.
East Lansing’s big plans to transform itself into a Gen-X mecca have been ill advised from the onset.
Sol Bilderberg
(07/23/09 8:19am)Report
City Officials were FULLY INFORMED of Strathmore’s financial troubles, PRIOR to approving the project and PRIOR to authorizing the use $30 Million Dollars of PUBLIC FINANCING for this project. Also, City Officials have spent MILLIONS of Dollars more on Property Acquisition for this project.
City Manager Staton, Mayor Loomis, Mayor Pro-tem Goddeeris, Councilmen Roger Peter, Beard, and Nate Triplett should all be removed from office, for perpetuating the deceptions and ignoring the voices of legitimate opposition.
In October 2007, Chappelle stated, under oath, that Strathmore had been pushed “TO THE POINT OF INSOLVENCY.” That was well before the recession and prior to the City unanimously approving this project.
East Lansing City Council and City Manager Staton knew about Chappelle’s liens, tax delinquencies, and COURT RULING that found that Chappelle INTENDED TO DEFRAUD another COMPANY.
East Lansing City Manager Staton and City Council knew about Strathmore’s FAILED projects, bounced checks, and Lawsuits involving projects in Petoskey and Ann Arbor.
Now, Strathmore can jack-up their listing price for their properties and sell them to the City of East Lansing—the taxpayers for $10 Million Dollars—on second thought $20 Million Dollars—since the CITY TAXPAYERS have a “RIGHT OF FIRST REFUSAL/FIRST DIBS to PURCHASE” Strathmore’s properties downtown.
Don’t blame Strathmore for leveraging to the max, for projects that he believes in. Blame City officials for ignoring—even attacking citizens who raised these questions BEFORE the project was approved. The City Officials are to blame.
What a total sham!
Please explore the Jane Meddaugh Affidavit.
Sol Bilderberg
George Kallan
(07/23/09 11:12am)Report
Developers have always been an easy target. I, for one, hope this project moves forward and revitalizes EL with a real downtown, rather than the bar and T-shirt scene it is now. Goldman Sachs made a kabillion dollar profit last quarter because they are not lending money out as the US government had hoped. Take a look around at all the empty store fronts and office buildings as see what happens when there is no capital for developers. We’ll become a ghost town. ** Strathmore is a major underwriter of the East Lansing Art Fair — you have to remember that these developers are huge supporters of the local community. If they go under, perhaps the EL Art Fair will be next.
Sol Bilderberg
(07/23/09 12:13pm)Report
Contrariwise, Banks ARE lending! That is how they make money.
They have simply stopped throwing money at HIGH RISK BORROWERS! The Developer delared his insolvency in 2007, PRIOR to the City Council approving the project and public financing in 2008.
It is a complete farce that the City Manager, the City Council, and the Developer blame THEIR mistakes on the banks and the recession.
These East Lansing Officials were fully informed about the Developer’s financial problems and the impending recesssion, but they plowed ahead anyway—ignoring and attacking the citizens who raised these questions.
City Manager Staton, City Council, and the Developer are engaging in pure and utter BLAMESHIFTING!!!
Sol Bilderberg
Rene Ewing
(07/23/09 12:25pm)Report
The proposed project will be a beautiful addition to East Lansing and will bring the main street a updated, progressive look and a lot of new jobs to the area. Strathmore not only supports the Art Fair, but the Capital Area Soccer’s Night at the Museum, as well as EL Great Lakes Folk Festival and other community support. They have allowed the EL Fire and Police to use their buildings for training for several years.
Instead of looking for ways to bring down a local developer, lets look for ways to support and promote them.
such crap
(07/23/09 12:32pm)Report
state news lets not forget they forelcosed on a property in lansing already. an apartment called woodland lakes was foreclosed on last summer. why would the city or anyone else believe it isn’t going to happen again when it happens with strathmore on a very regular basis.
Sol Bilderberg
(07/23/09 2:16pm)Report
So, are you suggesting that because Strathmore donates to the EL Folk Festival, EL Art Festival, and to a Soccer Event that the City of East Lansing should ignore all logic and give the developer a gigantic, no bid contract?
It seems to me that a developer is just trying to buy favors. Or is it bribery?
Apparently, the insolvent developer was using borrowed money to make these donations.
Second, who allows their own property to intentionally be destroyed—by the police and fire departments? Surely the developer gets something out of it. The Jane Meddaugh Affidavit state that—on the basis of the damage caused to the Citizens Bank building—the building was declared FUNCTIONALLY OBSOLETE. Therefore, it qualified for BROWNFIELD INCENTIVES and TAX INCREMENT FINANCING.
Oh how very generous of the developer—who happens to own the building.
He stated that he was insolvent in 2007. Don’t blame the banks or the recession. They don’t loan to such high-risk ventures.
Sol Bilderberg
Downtown is Dead
(07/23/09 3:56pm)Report
George, it is too late, East Lansing’s downtown has already become a ghost town. It was the bar and t-shirt scene of the last 1990s and early 2000s that kept the down town thriving. Thanks to East Lansing officials pushing students out of downtown, it is a lost cause at this point. Also, how will downtown EL support such a great development when it can’t support the high end All Season’s Bistro which was recently evicted (although there were some obvious management / cost issues with them).
Roberto Baggio
(07/23/09 5:47pm)Report
How much can I donate to re-forest Patriarche Park, fix the pathetic tennis courts, basketball court, and run-down picnic area near the water tower? The City Parks are an absolute embarrassment—except for the Soccer Complex—and the MONEY PIT swimming complex used by LANSING residents.
But, Mayor Loomis and City Manager Staton live in WHITEHILLS—among the RICH people, so recently they approved more than $200,000 for improvements to THEIR park: AL WHITE PARK in Whitehills. Good for them! Everything should be good for them and done for them.
Seriously, contrary to what one may infer from RENE EWING’S comment, it had to have taken MORE than just donations to the EL ART Festival and EL Folk Festival and Lansing Soccer, to get blindly unanimous support by City Council for Strathmore’s project.
How much is a vote worth? I recall reading an article that stated that Strathmore donated money to UM-Hospital in Ann Arbor, around the time of their (now failed) project next to the Hospital.
RBaggio
Sol Bilderberg
(07/23/09 6:33pm)Report
George Kallan: Please look at household savings rates during the last century and where we are at now. We are not spending; we are saving. You don’t spend your way out of debt.
You must have consumer demand for the product. You can’t just build something that has no demand, while using taxpayer money—it will fail.
Do you remember AUTOWORLD in Flint? Do you remember Oldsmobile, for that matter? If you fail to recognize what consumers demand, then you will fail.
Tim Dempsey, economic administrator for the City of East Lansing, stated in the State News recently that there is no demand for student rentals and adding more units will make things worse.
City Center II will be 1,200 student rental units.
If City Center II made any sense from an economic perspective, then this private developer would not be at the doorstep of City Hall—needing $56 Million in TAXPAYER FINANCING for his $125 Million project.
E.L. is a nice university town, right next to East Lansing.
By the way, if the City Police and Fire Departments hadn’t intentionally caused extensive damage to the Citizens Bank building, we could have made it a really nice base for IBM, when they came here. Instead, all of those workers are way down on the south side of MSU on Crescent! Brilliant!
George Kallan is telling us to “take a look around at all the empty store fronts and office buildings,” and—rather than recognize decreased consumer demand—he suggests we just spend more and build more empty shops and buildings. Brilliant!
Please find out who was allowed to scavenge all of the copper pipes from the Citizens Bank building.
Sol Bilderberg
Sol Bilderberg
(07/23/09 6:40pm)Report
There are many ways to beautify downtown without spending $125 Million Dollars, but the primary focus of our City Officials is limited to one task: INCREASING TAX REVENUE!
Since the Police and Fire departments completely trashed the inside of the Citizens Bank building, the City could just raze that corner—and expand VALLEY COURT PARK. They might consider actually MAINTAINING a Public Park for a change too. This would increase the number of people going out for a nice walk—and increase foot traffic to the shopping district. But Parks do not generate Property Taxes.
Why is it that the government—who has structured a $56 Million Dollar public financing plan for this project, using Tax Increment Financing, elimination of the single business tax, and incorporating Brownfield Incentives, along with FREE taxpayer money from the Michigan Economic Development Corporation—CANNOT lure a financially solvent developer to come in and develop this PRIME REAL ESTATE LOCATION?
Is it because the whole deal is so dirty, so full of lies, deceptions, favors and bribes, that no ethical developer would touch it? HUD will not either.
Don’t ask.
Sol Bilderberg
Sparty12
(07/23/09 10:33pm)Report
I never thought about bringing IBM to the old bank building until Sol brought it up. Its horrible that the building has been rendered unusable because bringing those jobs to the downtown area would be perfect. I wonder if there is still a way to get IBM located on that land. IBM solves an immediate problem by bringing however many hundred workers to the downtown area every day. Maybe when city center finally falls through the city can go back to the drawing board and SOLVE the downtown areas problems rather than build for the sake of building.