Chappelle Effectively Kills Park District Plans

Above: The blighted old bank building and what was supposed to replace it.

The Park District redevelopment project is “dead” according to the would-be developers, DRW/Convexity. A legal maneuver by Scott Chappelle, the developer who lost the properties to foreclosure years ago, has effectively killed the deal by getting in the way of the state-level funding needed to make the DRW/Convexity project happen at the blighted corner of Abbot Road and Grand River Avenue.

The project would have included a 13-story building with The Graduate hotel with 150 guest rooms, 197 market-rate rental apartments, retail space, two levels of hotel and tenant parking, and a public plaza. It would also have included a new 7-story condo building with 66 owner-occupied apartments just north of there, where a vacant lot now stands.

David Pierson, attorney for DRW/Convexity, tells ELi that his client will make good on its promise to demolish the remaining buildings on their properties at the blighted corner around October 7. But, he says, the plans as approved by East Lansing’s Council will be scrapped and the company will have to start over.

East Lansing will therefore soon be free of the blighted buildings, but facing what may be years of grassy, fenced-in spaces at its main downtown corner. Infrastructure that was going to be fixed as part of the project will now likely remain in disrepair, as the City does not have the funds to fix much of its aging infrastructure. Taxes captured from the new redevelopment were going to be used to pay for those improvements and repairs.

It was Scott Chappelle who left East Lansing the blight after years of public-private deal-making when the City was run by City Manager Ted Staton, predecessor to George Lahanas. When Chappelle began his plans, calling the project “City Center II,” various buildings in the project area were still occupied and in active use. But under Chappelle’s companies’ ownership, one building after another went vacant and blighted, and no redevelopment ever happened.

In 2015, Chappelle finally lost the properties to foreclosure, and subsequently DRW purchased them. Chappelle tried to fight the foreclosure, and lost. He is still locked in a lawsuit with DRW over a claim of violation of a confidentiality agreement. And now he has convinced the Michigan Economic Development Corporation (MEDC) that the State can’t provide DRW with tax incentives for the project without his permission—even though a court has decided he has no right to the properties.

DRW/Convexity’s plans for redevelopment depended on a Michigan Business Tax credit of $10 million that Chappelle had sought for his City Center II project from the State. This week, the Michigan Attorney General’s office advised the MEDC not to go forward without Chappelle’s consent. DRW and Chappelle did not reach an agreement, presumably because Chappelle wants money DRW won’t pay him.

And so the deal is dead, effectively killed by a developer from whom East Lansing may have thought it had freed itself.

For years, while Staton and previous City Councils made deal after deal with Chappelle, various citizen watchdogs warned against it. East Lansing resident Eliot Singer in particular doggedly researched Chappelle’s track record and repeatedly warned Councils against doing any deal with him because of his record of lawsuits, failed projects, and foreclosure actions.

East Lansing Info (ELi) was founded (by me) in large part to provide the citizens of East Lansing critical information about Chappelle and the City Center II project. In December 2014, three months into ELi’s existence, we explained, “Among those objecting to the situation, the fear is that, rather than getting rid of the blight, by trying to work with PDIG [Chappelle’s company] the City of East Lansing may be entering into 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.”

Knowing his reputation, the MEDC apparently didn’t want Chappelle as its legal problem. Yesterday, at the MEDC, DRW/Convexity and Chappelle attempted to reach agreement. But no deal was achieved.

Thursday evening, I sent Mayor Mark Meadows questions about the situation. In response, he made clear he thought the MEDC should not be afraid of Chappelle. If he were still Assistant Attorney General and was advising on this matter, Meadows told me, “I would tell them to go ahead and award the money to Convexity and if Chappelle wants to sue, let him.”

He went further: “In fact, I believe that the City has an investment in this whole matter and Chappelle is interfering with an advantageous economic relationship which would permit the City to make significant repairs and improvements to infrastructure and remove a potential debt.” He said he would be asking the City Attorney to look into an appeal of the State’s decision, and look into whether to sue Chappelle. “I think we have a far greater probability of success than he does.”

The Park District plan of DRW/Convexity mattered to the City’s finances in part because of debt coming due on properties purchased by East Lansing’s Downtown Development Authority (DDA) for the Center City II project. The DDA owes about $7 million on those properties and will soon have to start making large debt payments—larger than the DDA can afford. That makes it a problem for the City’s taxpayers.

Asked about that, Meadows told me on Thursday, “We have not discussed a plan regarding the DDA's obligation for the Evergreen properties but will have to at an appropriate time. There is no Plan B right now.”

Meadows joked darkly that he thinks “there will be reports of the sighting of the ghost of Scott Chappelle in the new buildings a hundred years hence. It is the story of determination in one sense—doggedly refusing to give up ownership and repetitively proposing unattainable objectives.”

The MEDC and Chappelle's attorney in this matter, Arthur Siegal, have declined to answer questions from ELi about how Chappelle can be said to have rights to tax future tax credits on properties he no longer owns.

In the end, Meadows said Thursday night, “I think we will see a project. Convexity has too much invested not to go forward with something. Maybe it is just the hotel. Maybe it will be back to the drawing board. In any event, there will no longer be decrepit buildings at the entryway to East Lansing.”

Reached for additional comment late last night, Meadows said he believes the MEDC and/or the Michigan Strategic Fund "have a responsibility to make a decision" and should not simply let the project die this way, with the MEDC effectively letting Chappelle have his way.

"That decision should state the facts and legal conclusions which would lead up to a determination [whether] Chappelle has any interest in the 10 million [dollar tax credit] and the legal basis for that interest," Meadows said. "We should demand such a decision if one has not yet been given."