Old AAA Detroit building subject of lawsuit; owner raises allegations against Duggan, DEGC

New development on former Statler Hotel site in the center of the case

[Update, Aug. 6, 2014, 9:00 a.m.: In a ruling from the bench on Tuesday, Wayne County Circuit Court Judge Robert Colombo ordered the owner of the former AAA building at 139 Bagley Ave. to demolish it by Aug. 15.]

Over the last month, a contentious battle over a small 5,800-square-foot building in downtown Detroit has quietly played out in Wayne County Circuit Court, pitting the city against a single real estate owner — one who accuses top Detroit officials of scheming to push him into selling the property at a lower price.

The city wants the building at 139 Bagley to be demolished. It's a blighted, dangerous structure, the city says, and its removal is necessary to facilitate a new proposal for the adjacent former Statler Hotel site, which consists of an entire city block owned by Detroit — except for 139 Bagley. But, earlier this year, discussions of a potential sale between 139 Bagley owner Anthony Pieroni and developer Village Green Development quickly fell through.

Pieroni, 76, says he sees potential for redevelopment at 139 Bagley, or, at least, he believes he deserves a fair purchase price in light of the Statler proposal and an anticipated $650 million new Detroit Red Wings arena and entertainment district. Pieroni also owns the nearby Michigan Theatre Building, a former 4,000-seat theater that was converted into a parking garage in 1977. That building went up for auction last month but was pulled only a week later.

In June, Detroit City Council decided against considering a motion to declare 139 Bagley a "dangerous building," a step required in the city's lengthy process to demolish a vacant property it doesn't own.

At that point, Detroit filed a lawsuit in Wayne County Circuit Court against Pieroni's Triple-A Venture, which owns 139 Bagley, and asked the judge to find the building a public nuisance and order it to be demolished. (Circuit Court Judge Robert Colombo was expected to issue his ruling from the bench after Metro Times went to press. Check MT's website for the update to this story.)

Constructed in 1916, the 139 Bagley structure previously housed a AAA of Michigan office from 1926 until it was damaged in a 2005 fire, which Pieroni, in court documents, says is the result of the Statler Hotel's demolition. Pieroni acquired 50 percent of the property's ownership in 1995, and later acquired the remaining interest just before the fire took place. Under Triple A's ownership structure, Pieroni remains the decision-maker, court records show. Since then, it has fallen into disuse; overhead views of the building show a relatively nonexistent roof. According to court filings, Pieroni incurred roughly $1.8 million in settlement fees for the damage.

Pieroni and the building were the subject of early discussions for Quicken Loans' relocation to downtown. At the time, the city reportedly said something would need to be done to 139 Bagley in order to facilitate Quicken's potential move to the Statler site.

Discussions surrounding the property quieted until this March, when the Detroit Downtown Development Authority (DDA) gave preliminary approval to a project from Farmington Hills-based Village Green Companies to construct an estimated 250-unit apartment project on the Statler site — including Pieroni's property.

Village Green has been a major player in Detroit's real estate market for decades. A company with a portfolio that spans 150 communities across the Midwest, Village Green operates more than 42,000 luxury apartments, according to its website. Founded in Detroit nearly 95 years ago, the company says it has played a role in developing the Virginia Park subdivision, the historic Fyfe building in downtown, and currently owns and operates the Detroit City Apartments in Grand Circus Park. Last year, the company purchased the 338-unit Millender Center Apartments.

At the March DDA meeting, Detroit Mayor Mike Duggan appeared and served as chairman, the only time he has done so since taking office in January. As the Detroit Free Press reported, Duggan said of the proposed Statler City Apartments project: "This is phenomenal ... I would like to cut out whatever we can cut out on the front end." As part of the DDA-approved deal, Village Green would receive the city-owned property for $1.

By June, Detroit City Council was set to consider 139 Bagley as a dangerous building, city records showed. But Council withdrew the resolution following a lengthy response from Pieroni's lawyers, who said the city was in no legal position to pursue that route. It was the second time in three years that 139 Bagley was withdrawn from such consideration.

In court filings, the city attempts to paint Pieroni as a holdout owner of a decrepit building, one who's been waiting to cash in on a lucrative opportunity. After learning about the $40 million Village Green project in March, Pieroni arranged a meeting with Village Green's chief, Jonathan Holtzman, and said he'd sell 139 Bagley for $4 million, according to court records. It was a standard price for real estate, Pieroni argued, at 10 percent of the total project cost.

"It is too obvious for words that the [Detroit Economic Growth Corporation (DEGC), which staffs the DDA] was willing to provide the Statler Hilton property to the developer for $1 as part of a major economic development project bringing $40 million investment to the city — housing, resident, jobs and taxes; the $1 price was not meant for the purpose of enriching Pieroni," the city wrote in a court filing.

Holtzman offered $1 million for the property, court records show, but Pieroni declined. Then, according to court records, Holtzman decided he could move forward with the Statler City project, without Pieroni's property — but only if 139 Bagley was demolished. Holtzman offered to cover demolition costs, and allow Pieroni to keep control of the property, according to court documents. Again, Pieroni declined. In a court filing, the city says that Pieroni's rejection of those offers is reason enough to have the building demolished:

"Had Pieroni accepted the $1 million offer for the property, or the offer to have the developer demolish the building, the nuisance would have been abated. Having rejected those offers, the nuisance now continues into its 10th year."

Though Pieroni's lawyers say he's interested in restarting negotiations with Holtzman, Detroit's counsel wrote:

"This bankrupt city needs to rid itself of this blighted, dangerous and decaying building, a structure that would not be tolerated in any other major city, let alone in a prime development area. This city needs the residents, jobs, and taxes that will come from the Village Green development."

If the city considers the 139 Bagley site ripe for redevelopment, with or without the Village Green proposal, though, is unclear. During a three-day trial last week, while Pieroni was on the stand, Deputy Corporation Counsel Charles Raimi asked him point-blank if he would sign a consent agreement that would obligate him to redevelop 139 Bagley. Depending on the language of the agreement, Pieroni said, yes.

As he put it earlier in the hearing, "Things have changed,"

In a counter-complaint, Pieroni offers a different side to what has transpired over the previous months, and offers eye-raising allegations that the city has launched a scheme to pressure the owner into selling the property for less.

"The city itself, and in concert with the Detroit Economic Growth Corporation, has brought this action at the taxpayers' expense to give the private developer leverage in its negotiations for a potential private sale of the property," Pieroni's lawyers wrote in the complaint.

After initial discussions with Holtzman fell through, Pieroni's lawyers say in court filings that he arranged a meeting in April with DEGC executive vice president Brian Holdwick to discuss potential development of the site. According to court documents, Pieroni alleges that Holdwick didn't like his offer, calling it "unfair" and "unreasonable."

At the April meeting, according to the counter-complaint, Holdwick allegedly said that "unless Mr. Pieroni caused Triple-A [Venture] to price the property to the City's satisfaction, that anyone seeking to buy and develop the Michigan Building ... was likely to be denied the kinds of tax breaks ... financial incentives the City commonly offers for downtown development projects." Holdwick deferred request for comment to DEGC spokesperson Bob Rossbach, who declined comment, citing the ongoing litigation.

As Pieroni's lawyers put it in court filings, "The DEGC had the authority and support of the City and the DDA and was in fact carrying out a City and DDA mandate to get the property away from Triple-A and to do it as quickly as possible."

That mandate, Pieroni's lawyers contend, came from Duggan.

Before the lawsuit was filed by the city, Pieroni's Triple-A filed a Freedom of Information Act request with the city for communications related to 139 Bagley. About a month after the alleged meeting with Holdwick, an employee of Detroit's Building, Safety Engineering and Environmental Department (BSEED) sent an email to a supervisor regarding 139 Bagley, saying:

"Brian from [Detroit's Planning & Development Department] ... came to me about this today," wrote building inspector Arthur Edge, in an email dated May 21 to David Bell, executive manager of BSEED. "He said he was coming from a meeting with the Mayor and that the mayor wanted the location demolished. I told him to contact you."

It's unclear who "Brian" refers to, but roughly a half hour later, Bell wrote in an email to Edge and top officials in the building department: "Team, Get me an inspection on the way into the office tomorrow." Edge could not be reached by Metro Times; Bell deferred comment to Duggan spokesperson John Roach, who sent a statement on behalf of Detroit Corporation Counsel Melvin "Butch" Hollowell. (Hollowell declined to comment on Pieroni's claims for this report, saying they will be addressed in court.)

"The City of Detroit's Law Department is now aggressively filing lawsuits against the owners of blighted commercial properties," Hollowell said in the statement. "Our objective is not to obtain the title to these properties, but to have these dangerous eyesores demolished at the owners' expense. Very often, these owners have sat on these structures for years, accepting no responsibility for their negligence. Those days are over. There is no right to blight."

Pieroni's lawyers, in court filings, contend otherwise: "The conduct at issue is, at its core, a scheme to gain control of the last privately-owned parcel of real estate on one of the most valuable undeveloped sites in downtown Detroit."

Pieroni's lawyers accuse the city of deprivating federally protected rights, tortious interference with business relationships and expectancies, and civil conspiracy.

To make its case, the city, according to Pieroni's lawyers, has implied in court that Pieroni is sort of a "creep," hell-bent on enriching himself off the Village Green proposal.

City lawyers perhaps sought to exemplify that point by entering into evidence an email string between Pieroni and Village Green's Holtzman. About a week after the email from building inspector Edge was sent, Holtzman reached out to Pieroni on May 30, asking if he'd meet again to discuss demolishing the building, a proposal "we discussed ... without city involvement."

Pieroni wasn't pleased with the offer.

In his reply to Holtzman, which copied the DEGC's Brian Holdwick, Pieroni wrote: "Don't play stupid with me re: land value. I WILL NOT BE EXTORTED and certainly not by assholes such as you and Holdwick."

He later added: "If you ever approach me again about this matter you had better be on your fucking knees and groveling."

In court filings, Pieroni's lawyers countered those points, saying Pieroni pulled the Michigan Theatre Building from an auction and alleges he sold it for less than he could've gotten at auction "because of the disclosure problems created by the DEGC." And, they later added, "Mr. Pieroni is not a creep."

At press time, the city has not responded to the counter-complaint.

UPDATE: Judge orders AAA building demolished.