Wednesday, June 24, 2015

Owner of now-demolished 'CARE' building sues DEGC

Posted By on Wed, Jun 24, 2015 at 12:34 PM

click to enlarge MT/RYAN FELTON
  • MT/Ryan Felton
The owner of the former "CARE" building in downtown Detroit — a five-story structure that was featured in a Kid Rock video and later demolished upon a court order — has filed a lawsuit against the Detroit Economic Growth Corporation (DEGC), claiming the agency extorted him into selling the property at an unacceptable price. 

In a one-count complaint filed in Wayne County Circuit Court on Monday, developer Anthony Pieroni alleges the DEGC and its outgoing executive vice president, Brian Holdwick, made a threat last year to withhold any tax credit or subsidy to prospective buyers of the Michigan Building — which was also owned by the 76-year-old developer. The purpose of the threat, the complaint alleges, was to compel Pieroni to sell the CARE building at 139 Bagley to a company with plans for the former Statler Hotel site at a price far-less than what he considered fair. 

The allegations were first reported by MT last year.

The dispute over the 5,800-square foot building on the Statler site began in March 2014, 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. (The building was owned by Triple-A Ventures LLC, which Pieroni maintained a 50 percent stake in.)

"Significantly, the plan drawings also showed the development occupying the property known as 139 Bagley, which was and is owned by Triple-A Venture, LLC, even though nobody had notified or consulted with Triple-A before announcing the plan to build on its land," the seven-page complaint says. Pieroni declined comment on Wednesday. 

(Pieroni has said in court the CARE building was damaged as a result of the Statler Hotel demolition in 2005. He stated he believed the building was now ripe for redevelopment, given the construction of a new $450 million Detroit Red Wings arena nearby. Over the last decade, however, it fell into disuse; overhead views revealed a relatively nonexistent roof. According to court filings, Pieroni incurred roughly $1.8 million in settlement fees for the damage.)

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, court records show. It was a standard price for real estate, Pieroni argued, at 10 percent of the total project cost. But discussions quickly broke down. The complaint alleges Holtzman then said he would get the city to tear down the CARE building at Pieroni's expense. 

In late April, Pieroni arranged a meeting with Holdwick to discuss potential development of the site. The pair talked about Village Green's project, and Pieroni said he'd cooperate on a sale price if the compensation was "satisfactory," the complaint says. 

Holdwick didn't budge. According to the complaint, Holdwick allegedly said Pieroni should accept Holtzman's offer, and if he didn't, "the DEGC would not extend ordinary benefits, credits, approvals, and licenses to the purchaser of the Michigan Building." A DEGC spokesperson declined comment.

"As a matter of policy, DEGC does not make public comments about matters that are in court," said spokesperson Bob Rossbach. 
 
The Michigan Building was initially up for auction, but was later pulled. Pieroni says that's because he would be required to disclose the threat that "benefits, credits, approvals and licenses ordinarily extended by the DEGC ... would not be extended to the purchaser of the Michigan Building." The complaint says Holdwick was aware that converting the Michigan Building to apartments was the only "best use of the property," and that the building's property value would be significantly reduced without any prospective subsidy.

Pieroni later sold the Michigan Building to developer Dennis Kefallinos, who plans to convert it to an event space

Today, the Statler site is entirely vacant. That's because, last August, the City of Detroit filed a nuisance complaint against Triple-A Ventures, and asked Wayne County Circuit Court Chief Judge Robert Colombo to find the building a public nuisance and order it to be demolished. In court, the city attempted to portray Pieroni as the owner of a decrepit building who was seeking to cash in a lucrative payday.

"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.

Pieroni told city attorneys he saw potential for redevelopment at the site, especially in light of the Statler proposal and an anticipated $650 million new Detroit Red Wings arena and entertainment district — or, at least, what he considered a fair purchase price. Asked about the potential for development, Pieroni said on the stand, "Things have changed."

Colombo didn't buy it. In a near-hourlong terse opinion issued from the bench, Colombo sided with the city, saying the structure had deteriorated to the point "a high wind can easily knock the east wall down ... and injure or kill members of the public."

Pieroni said he would have considered signing a consent agreement to redevelop the property, as proposed by a city attorney — depending on the circumstances. But Colombo said Pieroni has had years to begin renovations, with more than $1 million in settlement fees after damage to the building took place during the Statler's demolition. 

"Mr. Pieroni has no intention of renovating the building," Colombo said. 

The building was demolished in mid-August, at Pieroni's expense. (Pieroni appealed Colombo's decision to the Michigan Court of Appeals and an opinion is still forthcoming.) 

Detroit City Council approved Holtzman's residential project in March, and the developer has said it will be completed in late 2017. 

Currently, however, Pieroni still owns his parcel of the site — a piece still included in the development's plan. Rossbach told MT he would look into whether there's been discussion "in a public forum regarding the situation."

Pieroni demands a jury trial and seeks compensatory and exemplary damages in excess of $25,000, and attorney's fees and costs. The DEGC hasn't yet responded to the suit. 

Pieroni DEGC Complaint


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