If a local developer cannot find financial footing for City Center II — a major downtown development — before it falls victim to foreclosure, the project is dead, City Manager Ted Staton said.
Seven properties in the project area have gone into foreclosure. They are held by Strathmore Development Company for City Center II, a $116.4 million mixed-used development planned for the corner of Abbot Road and Evergreen and Grand River avenues. The foreclosure property sale is scheduled for Sept. 17, almost two weeks before the developer is to appear before the East Lansing City Council to submit a financial plan.
If the property is sold, the developer no longer will own the properties and the city will not be able to go forward with the project, Staton said. The properties are listed under City Center II LLC, which is a part of Strathmore.
In the Aug. 27 issue of the Ingham County Legal News, a foreclosure notice was posted saying the properties were up for auction. On July 9, the publication also printed a foreclosure notice. However, both the mortgagor, Huntington National Bank, and Strathmore President Scott Chappelle said the print was an error.
But the most recent foreclosure notice is correct and the bank is proceeding with the foreclosure on the property, wrote Eric Sanko, vice president of Special Assets at Huntington in an e-mail.
“The foreclosure is the result of continued and significant defaults under the terms of the loan agreement,” he said. “(Huntington) hopes that a more amicable resolution to this matter can be found, but at this point finds no other remedy than foreclosure on its collateral.”
Chappelle wrote in an e-mail that Huntington and Strathmore had reached an agreement, contradicting Sanko’s statements.
“The City Center investor group has reached an agreement with the lender that resolves the foreclosure issue,” he said.
Sanko said he could not go into details about the terms of the loan agreement that was defaulted on. However, Huntington will go forward with sale on the seven properties listed in the notice.
With the developer on its fourth extension to secure funds for the project, this notice comes shortly before the City Council plans to take action on the project later this month. Depending on what the developer brings forth, the council could stick with Strathmore or go in a different direction.
“It’s entirely dependent on the development company to bring their piece of the project to the table,” Councilmember Nathan Triplett said. “Obviously we wished the project could’ve moved forward a little more quickly, but I’m sure you’ve seen that securing the financing for a project of this magnitude in the credit markets like these is difficult.”
Staton said even if the properties are foreclosed upon, the city still will own its pieces of property and still plans to build a parking structure there.
“We’ve planned to build that parking ramp there for 10 years,” he said. “We’re owning them and we’re keeping them.”
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