Developer's Owners Include Children, But Little More Revealed at Council

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Tuesday, November 25, 2014, 11:52 pm
Alice Dreger

Image: Planning Director Tim Dempsey speaks at City Council

Tonight at City Council, Planning Director Tim Dempsey told Council that the development company PDIG—with which the City is actively negotiating on what would be the largest development in City history, at the corner of Grand River Avenue and Abbot Road—is owned in part by minor children.

According to Dempsey, this is one of the reasons PDIG (Park District Investment Group) will not reveal who they are, i.e., to protect the children who have ownership in the company. Dempsey told Council that PDIG also does not want to reveal who its owners are because it fears harassment from the public, including from people who might want to pitch to them other projects for other sites.

The project is set to involve a 10-story building with an Indigo Hotel, other commercial space, and apartment residences, and is expected to involve millions of dollars in public financing. During public comment, Shanna Draheim of 359 University Drive spoke in support of the development, saying she was concerned that the “dialogue about the Park District has been dominated by a minority group of vocal naysayers.”

Ray Vlasin of 1854 Cricket Lane said he was not there to speak in favor or against the project but to procedure. He said he spoke from a background of 40 years in economic development when he said, “One basic rule is you know the persons with whom you are doing business.” He said many citizens he spoke with shared this concern about PDIG’s secretive ownership structure.

Dempsey suggested that Council go ahead and pass the site plan and special use permits required by the project without knowing who PDIG’s owners are, and that the City protect itself through a development agreement to be worked out after these approvals. Councilmember Kathy Boyle, an attorney, pressed the question of whether doing so would commit the City to the project before due financial diligence, and Dempsey said that financial issues can be examined through the development agreement after approval of the site plan and special use permits. He suggested that, even if Council approves the site plan, the City would not issue a building permit until needed infrastructure improvements are completed, as would be provided in a development agreement.

Dempsey said that in conversations with those said to represent PDIG, “they have shared with me that Charlie Crouch is the managing member of PDIG” as well as the person who has “majority ownership stake” in the LLC (limited liability company). Crouch is the long-time partner of controversial developer Scott Chappelle of Strathmore Development, the company that failed to bring City Center II (in the same location) to fruition. As ELi has reported, Chappelle is said to no longer be a principal in PDIG, but Chappelle will not confirm or deny this.

Dempsey says the City can protect its interest through the requirement of performance bonds and of escrow accounts. A performance bond is meant to protect against a developer starting but not finishing a project. Boyle asked how anyone could afford a performance bond of the size that would be required to actually complete a project of this size. Dempsey said the bond would most likely only ensure that the public parts of the project would be completed, including such elements as water and sewer upgrades and street realignments. He said the performance bonds would be only for the public infrastructure “because that’s the critical piece for us.” Consequently, performance bonds might ensure the underground water and sewer pipes and roads are completed, but would not ensure the building as planned is ever built.

Councilmember Ruth Beier asked if the ownership is going to be kept secret from the staff, or Council, or everyone. Dempsey said he would let the applicant speak to that, but no one from PDIG spoke at Council. Dempsey said “they do have some willingness to share that [information] with certain groups of people.” But, he added, PDIG’s goal is to keep it confidential from overall public view.

During the City Center II process, the City required a $10,000 development bond from Strathmore Development Company when Strathmore sought to demolish the publicly-owned “little bank building” at 303 Abbot Road. Strathmore stripped the building of salvageable materials and left the newly-damaged publicly-owned building standing and unusable. It has remained unusable and vacant since.

Internal documents obtained through the Freedom of Information Act show that in 2012 Dempsey hastened Strathmore’s ability to start demolition on the “little bank building” in order to avoid having the agreement between the building and developer "time out.” The project fell apart anyway in 2012.

City Manager George Lahanas told ELi that the $10,000 bond fell well short of being enough for the city to complete the demolition, which is why the now-derelict "little bank building" stands at the corner of Albert and Abbot. PDIG is seeking to purchase the property as part of the new project. The price paid to the DDA for this publicly-owned property will likely be lower than it would have been had Strathmore Development not stripped the building and rendered it uninhabitable in 2012.


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