Judge Clears Way for New Owners of Blighted Properties

Friday, February 5, 2016, 12:17 pm
By: 
Alice Dreger and Ann Nichols

Ingham County Judge Joyce Draganchuk ruled today against a request for legal delays by the corporation known as City Center Two Project LLC in regard to a group of major blighted properties downtown, essentially clearing the way for new owners to take over without major legal encumbrances. This means the new owners could potentially move to demolish the old buildings and seek approval for redevelopment of the blighted area.

The properties include the “big bank building” at the corner of Abbot Road and Grand River, the commercial buildings between that building and People’s Church, and the former Evergreen Arms apartments, a brick set of apartments on Evergreen Avenue across from the Valley Court tennis courts. (See photos above and below.)

Last summer, the lender on the properties foreclosed on the properties, and thus took control of them via sheriff’s deeds. But Michigan law allows a foreclosed-upon owner six months to come up with enough money to “redeem” (essentially buy back) the properties.

During this redemption period, as ELi reported, the sheriff’s deeds were sold by the lender to a new company, WGR Finance. WGR Finance has had to wait for the redemption period to end to take next steps.

With the redemption period set to end tomorrow—or technically Monday, since tomorrow is not a business day—the old owner, City Center Two Project LLC, associated with the also-controversial company PDIG, went to court to throw a wrench in the works. Following on the legal arguments made last week, today lawyers for City Center Two Project LLC tried to argue that the foreclosures had not been done properly.

The lawyers also tried to argue that the Michigan foreclosures were not ever legal because the parties had previously agreed to settle their dispute under Ohio law, and Ohio law doesn’t allow for the kind of foreclosures that happened—a foreclosure using advertisement and a sheriff’s sale by auction. (Ohio foreclosures require courts to be involved.)

Lawyers for the lender and for WGR Finance responded by telling the judge that City Center Two Project LLC had no case—that the foreclosures had been legally appropriate and were a done deal. They argued that the City Center Two Project LLC lawyers were trying to seek the same legal “relief” from both this court and a court in Ohio, which isn’t allowed. They argued against claims that WGR Finance is not the “bona fide purchaser.”

Judge Draganchuk decided that the lawyers for City Center Two Project LLC had failed to make their case.

She characterized the the arguments being made by the City Center Two lawyers as “curious at best and probably better characterized, at least to this court, as incomprehensible.” She noted the same lawyers now claiming the Ohio legal agreements had disallowed the possibility of a Michigan-style foreclosure had previously gone to the Ohio court seeking to stop the same foreclosure. She said it made no sense that the lawyers could seek legal relief in Ohio regarding a Michigan foreclosure and then claim Ohio law did not apply to Michigan foreclosures.

The lawyers arguing against City Center Two Project LLC had asked for sanctions (financial penalties) to be levied against the other side for the way they had behaved in the courts. But the judge said this situation did not rise to the level of sanctions.

It now appears that, as of Monday, WGR Finance will own the properties without fear of City Center Two Project LLC or its affiliates regaining control. That said, a lawsuit still exists between these groups, with those affiliated with City Center Two Project LLC suing those affiliated with WGR Finance allegedly for violating a nondisclosure agreement over these properties.

As ELi previously reported, the address for WGR Finance is the same as for DRW, a company that does financing for Core Campus, a developer of upscale college student housing. Statements made by the lawyers today essentially confirmed that WGR Finance is associated with Core Campus.

What happens next depends on what the new owners want to do with the properties. They could sell them or develop them, or partner with another company to develop them. Any plan would have to go through the usual approval system, including review by East Lansing’s Planning Commission and approval by East Lansing’s City Council.

But for now, it appears that the properties have been freed from a tangled legal web that had threatened to prevent any progress forward.

 

Below: The former Evergreen Arms apartments, part of the properties at issue in today's ruling.