Deeds on Blighted Properties Have Changed Hands
(With reporting assistance from Chris Root.)
The two sheriff’s deeds on a major group of blighted properties in downtown East Lansing have changed hands according to documents recently filed with Ingham County. The properties at issue include the vacant “big bank building” (the former Citizens Bank) at the corner of Grand River Avenue and Abbot Road, the other vacant commercial properties between the big bank building and Peoples Church, and the abandoned Evergreen Arms apartment buildings (the two-and-a-half story brick apartments along Evergreen Avenue near the Valley Court Park tennis courts).
Regular readers of ELi may recall that these properties had been owned by the controversial company Park District Investment Group (PDIG). At a mortgage foreclosure auction of August 6, 2015, the two sheriff’s deeds were purchased for a combined $11,000,000 by company that held mortgages on the properties, DDR Mountain Vista City Center. (It is common for lenders to buy deeds to properties at auction if the amount owed to them on the properties’ mortgages is greater than the properties will otherwise sell for at auction.)
There were two sheriff’s deeds at play at the auction because there were two mortgages on the properties held by Mountain Vista. One was on all of the “City Center II” project properties except the big bank building. The other covered all the private properties in the “City Center II” development area, including the big bank building.
According to documents recently filed with the Ingham County Register of Deeds, DDR Mountain Vista City Center, LLC, has assigned (that is, sold) the sheriff’s deeds to WGR Finance, LLC. The assignment was effective December 15, 2015. The price paid has not been disclosed.
The address for WGR Finance is 540 W. Madison, Suite 2500, Chicago. This is the same as for DRW, which according to a source familiar with financiers for campus housing, does financing for Core Campus, a developer of luxury student apartments, such as The Hub in Madison, Wisconsin.
Back when the City of East Lansing was entertaining proposals for redevelopment of the Park District area, Core Campus had submitted a proposal. But Core Campus withdrew its proposal on March 6, 2013, because, according to a letter to the City, it had “not been successful in reaching an agreement with the adjacent property owner.”
In January 2014, Core Campus bought three properties on the south side of East Grand River Avenue in East Lansing, between Bogue Street and Hagadorn Road, including the 7-11 store property, but these have not yet been redeveloped.
Michigan law allows for a redemption period of six months on foreclosed properties. If the persons or businesses foreclosed upon can come up with the money paid at the auction plus interest, they can buy back the properties they “lost” at auction and regain control.
PDIG has a few more weeks—until February 6, 2016—to redeem the properties in downtown East Lansing. Otherwise the holder of the sheriff’s deeds will become the owner. During the six-month redemption period, which can be extended by the holder of the sheriff’s deed, the properties are in a kind of limbo, where the prospective new owner cannot develop or otherwise use the properties.
PDIG filed suit in Cuyahoga County Court (Cleveland) on June 18, 2015, against the lender DDR/Mountain Vista. The judge in that case refused to grant an injunction against the sheriff’s auction—which meant the auction proceeded as the lender wanted, against PDIG’s wishes—but the breach of contract complaints made by PDIG against DDR have not been dismissed. A jury trial in the case is scheduled for June 13, 2016.
As part of the trial’s discovery process, on November 9, 2015, the judge authorized an out-of-state subpoena on Core Campus Investment Group, concerning any contacts with DDR/Mountain Vista.
All of this means that a legally complicated situation for these properties just became a little more legally complicated. ELi will continue to follow this story.
At its recent Strategic Priorities meeting, East Lansing’s City Council discussed the possibility of ordering the demolition of the vacant, blighted properties. As ELi previously reported, last December this Council passed an ordinance which makes it easier for the City to order the tearing down of a dangerous building when “the cost of the repairs would exceed 100 percent of the true cash value of the structure as reflected on the city assessment tax rolls.”
City Manager George Lahanas told Council at its Strategic Priorities meetings that tickets for deficiency of upkeep were going to be issued on the big bank building very soon. The cost of the demolition would be charged to the owner. Legal appeals in the process could, however, delay demolition by many months, and the legal bills for the City’s side of the matter would be borne by the City’s taxpayers.
[Note: The second-to-last sentence, "The cost of the demolition would be charged to the owner," was added after original publication to clarify the issue of costs.]