Photo: Strathmore Development's unfinished project in Ann Arbor
Today, “Ask Eli” responds to a question that arose in conversation with ELi readers following this week’s City Council meeting. As ELi reported, many citizens spoke at Council to object to the City considering a proposal from Park District Investment Group (PDIG) for redevelopment of the blighted corner at Grand River Avenue and Abbot Road, particularly because PDIG won’t reveal exactly who owns the company.
Everyone weighing in on the debate publicly seems to agree on one thing: they want the blighted corner redeveloped, and soon. So:
The question: What’s the fear in East Lansing about PDIG?
Background: A number of citizens have insisted that City Council, City boards, and City commissions should not be considering the proposal from PDIG unless they know who exactly owns PDIG. The concern in this case is not uncertainty per se, but that PDIG is ultimately tied to developer Scott Chappelle, principal of Strathmore Development Company.
As outlined below, Strathmore has a troubling record—including at this very corner site in East Lansing—of failing to get projects built and of entangling projects in lawsuits, liens, and foreclosure actions.
A letter from PDIG’s representative this week did not clear up the question of ownership, but did suggest that the major principal in PDIG is Charlie Crouch, a long-time business associate of Scott Chappelle, principal of Strathmore Development. In fact, the letter was signed by an attorney who has long been Strathmore’s lawyer for development projects. All this suggests strong connections between PDIG and Strathmore.
So what is the fear?
The short answer: Among those objecting to the situation, the fear is that, rather than getting rid of the blight, by trying to work with PDIG the City of East Lansing may be entering a situation where the City is prolonging the blight—by working with a developer they fear simply can’t produce. Some also fear the City will end up losing money from working with PDIG, because other municipalities and public investment systems have run into costly problems (see below).
The longer answer: Strathmore Development was the group that was supposed to bring us City Center II at this very site. It never happened. This isn’t the only place where a big project proposed by Strathmore Development or its affiliated companies never happened. Another good example would be the “Broadway Village” project in Ann Arbor. As Judy McGovern reported for the Ann Arbor Observer, “instead of shiny new condos, retail, and office space promised by the developer, Broadway Village is 6.4 acres of unmowed field ringed by a chain link fence.” (See photo above for a recent picture of "Broadway Village.")
Here in East Lansing, Strathmore Development promised to demolish the publicly-owned “Little Bank Building” at 303 Abbot Road as part of City Center II. Instead, the company “completed the salvage of all recyclable and reusable materials,” rendering it unusable, and left it standing, derelict. (See p. 5 of PDF here for the quotation.) Strathmore has also left the Evergreen Arms, which was an actively-used apartment building along Valley Court, derelict and vacant. Same thing with the two-story commercial building next to Peoples Church's memorial garden. What we got out of "City Center II" under Strathmore was more blight.
That, though, constitutes just a small sample of the history worrying citizens who are showing up to speak at Council and other public boards charged with overseeing approval of this project’s many parts. I asked Eliot Singer, a citizen watchdog who has been tracking Strathmore and its relations, to give us a summary report of what he has found by searching through registers of deeds, assessment records, court cases, and news stories. This is Singer’s summary history of Strathmore Development Company-affiliated projects with foreclosures and mortgage defaults:
- Woodland Lakes Apartments, Delhi Township (Holt), Michigan: Ownership of limited liability company seized by creditors, summer 2008.
- Foley Town Square (strip mall), Fenton, Michigan: Sheriff’s foreclosure auction, October 2009.
- Silver Lake Hills Apartments, Fenton, Michigan: deed in lieu of foreclosure to creditor, October 2010.
- Columbia Lakes (subdivision) near Mason, Michigan: Project dating from c. 2000, with little completed prior to deed in lieu of foreclosure/duress sale, December 2009-January 2010. (Read an article about this project in the City Pulse here.)
- Nixon Farms, Grand Ledge, Michigan: Project, dating from c. 2000, imposed by court judgment against will of Delta Township officials. Parts sold (voluntarily or under duress) to others have resulted in apartments and an ongoing subdivision. The commercial part retained by Strathmore affiliate was never constructed. In February 2011, the mortgage (presumably in default) was assigned to a limited liability company associated with Charles W. Crouch. The mortgage was reassigned in April 2012 to Lamar Construction.
- Lower Town (Broadway Village), Ann Arbor, Michigan, as mentioned above: Massive mixed-use development project in works since c. 2000. Abandoned after groundbreaking in January 2008. The entity representing a $20 million investment by the State of Michigan Retirement System (SMRS) took managerial control from Strathmore some time in 2009 in the context of a lawsuit involving contractor liens and alleged false affidavit to a title company.
- Bear Creek, Petoskey, Michigan: Imposed against will of local officials by court judgment. Sheriff’s deed, December 2011, after failed Chapter 11, on portion of apartments owned by Bear Creek Partners I, under Strathmore management (according to 2010 court documents). Other portion of apartments and commercial part of development, controlled by Crouch Investment Group (according to court documents) went in receivership in March 2009 for defaults on large National City mortgages, assigned to a distressed mortgage company in May 2010. In June 2012, the sheriff’s deed was redeemed and all portions of Bear Creek consolidated under a new large and new small mortgage, both signed by Chappelle. In April 2014, the portion under the small mortgage was lost to a deed in lieu of foreclosure and the large mortgage was listed as in default, with ongoing litigation involving both Chappelle and Crouch. (Read more about how a related lawsuit has cost Bear Creek Township over $388,000.)
- The Pointe, East Lansing commercial brownfield project: Sheriff’s deed to lender, May 2009. Sheriff’s deed assigned to Crouch Investment Group, and property transferred to new LLC. Foreclosure notices in late fall 2013 on mortgage signed by Crouch. Limited liability company transferred to new ownership, November 2013.
- City Center II, East Lansing (the site including land now being proposed for redevelopment by PDIG): Foreclosure notices on properties other than Big Bank Building in summer-fall 2009. Amended, mezzanine mortgage to Mountain Vista Real Estate Opportunity Fund has been listed in default since 2011. Mortgage on Big Bank Building, presumably in default, was assigned to Crouch-affiliated company in 2012. Sheriff’s auction on new mortgage, signed by Chappelle, in fall 2012, redeemed after several extensions of redemption period in November 2013.
- Center of Bonita Springs, shopping center renovation, Fort Myers, Florida: Foreclosure judgment on large National City mortgage, January 2010. Court settlement on secondary mezzanine mortgage to Mountain Vista attached to City Center II mortgage. (Read a news story about the halted development here.)
- Gibsonton Square, Tampa, Florida: Large National City mortgage in default was assigned to Crouch Investment Group, followed by deed in lieu of foreclosure in April 2010. New mortgage to private lender signed by Crouch. Project apparently abandoned, with overgrowth citations.
- Bonita Exchange, Fort Myers, Florida: Only minimal infrastructure work ever done. Mortgage, presumably in default, assigned to Crouch affiliate, February 2011. New joint mortgage with Alico Retail Holdings, Chappelle and Crouch both guarantors. Sheriff’s auction on that mortgage, June 2012, with ongoing litigation.
- Alico Lakes, commercial development, Fort Myers, Florida: Large National City mortgages in foreclosure assigned to Crouch Investment Group, April 2010, followed by deed in lieu of foreclosure. Divided into three LLCs, with new mortgages, one (mortgage signed by Crouch) has since been sold, one (mortgage signed by Chappelle) remains under Strathmore management. Alico Retail Holdings was under the joint mortgage/sheriff’s auction/lawsuit with Bonita Exchange.
- Creekside, mixed-use development, Gahanna (Columbus), Ohio: In mortgage default with ongoing litigation.
Not included here, says Singer, are “numerous lis pendens (foreclosure notices) from contractor liens or numerous tax liens by federal, state, and local governments.” You can read about those in part here in a letter Singer sent to the East Lansing Brownfield Development Authority, and in Singer’s reports to Public Response.
The bottom line: A number of citizens are alarmed at this situation, concerned that the City may be facing additional debt and prolonged blight if the City tries to work with PDIG on this very big, very important project. Nevertheless, City Planning staff and the City Attorney have maintained that the City should continue moving through the process without scrutinizing, at this point, the ownership and financial situation of PDIG.
Take, for example, the remarks of City Planning staffer Lori Mullins at the November 20, 2014, meeting of the East Lansing Brownfield Redevelopment Authority (BRA), when the BRA was considering giving tax incentives to PDIG for this project, as captured in an audio recording of the meeting:
Speaking in response to a letter from Singer and public comments from former City Councilmember Ralph Monsma, a member of the BRA asked Mullins, “Does it matter who the members of PDIG are? I just don’t know. I don’t have a review on it, but, I mean, do we care? Is it important? Do we look stupid if we don’t know the answer?”
The City’s Lori Mullins replied, “In terms of who the developer is, you know, Mr. Eckhardt [lawyer for PDIG; long-time lawyer for Strathmore] is here, he’s representing PDIG and he’s been sort of our representative. And then you know we have talked with a couple of owners in the project, but we certainly don’t—staff certainly doesn’t have a list of all the owners—we don’t really think it is necessary to look into all that at this point.”
The BRA then proceeded to talk further about moving PDIG's proposal through the process of being approved for tax incentives.
What does Council think? At Council this week, three Councilmembers were actively involved in the discussion of at what point the City should start paying attention to the ownership and trustworthiness of PDIG: Mayor Nathan Triplett, Ruth Beier, and Kathy Boyle.This week, following the intense discussion at Council, I asked the three of them by email to clarify why, given that the project proposal requires the use of now-publicly-owned land (including the Little Bank Building at 303 Abbot Road), City Council can’t at this point assess whether it makes sense to continue talking about a public-private partnership with PDIG.
Just to be clear, City Attorney Tom Yeadon and Triplett have said that Council can't talk about this as site plan reviewers. But could they theoretically talk about PDIG's owners' track records as potential business partners to PDIG? At Council, there seemed to be clear agreement that if an owner of a property that is part of a site proposal wants to pull out of that proposal, it can, and the City is just such an owner of land required for the proposed area.
In response to my question about this, Beier says that she is checking on the question with the City Attorney.
Triplett has not answered.
Boyle responded, “Because of the expressed desire of so many East Lansing people that new development occur at that location, we need to seriously consider the current proposal.”
In other words, some people in East Lansing want redevelopment badly enough that they believe the risk that others see with PDIG, if it exists, is worth taking with publically-owned land and public money.
Photo of Broadway Village courtesy of Jim Anderson
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