Lender sues over $2.275 million loan on The Gallery condo project in ex-Greek church in Ann Arbor
A sign promoting The Gallery mixed-use development still hangs from the former Greek Orthodox church on North Main Street in Ann Arbor.
Paula Gardner | AnnArbor.com
The building - falling into disrepair as it awaits demolition - had been planned as the site of a $67 million mixed-use, 11-story condo tower called The Gallery.
Huntington National Bank is suing North Main/Fourth Ventures LLC, the ownership entity led by Ann Arbor developer Michael Concannon; his business partner, Paul Sieben of Ohio; and 414 N. Main St. LLC, an entity led by Mel VanderBrug of Bloomfield Hills.
Also named parties in the lawsuit are H+M Demolition Co of Holland and Washtenaw County Treasurer Catherine McClary because of their lien positions on the property.
The lawsuit is the second of a two-part effort on behalf of the bank to pursue payment, Concannon said. He called the action heavy-handed.
“They can either go after the property or guarantors or both,” he said. “They’re choosing both.”
However, Concannon said, the national investment and development climates mean that banks “don’t want buildings back.”
While in years past, banks would move to take the asset, they’re now pursuing judgments against borrowers who miss payments.
In the case of the former Greek church, the lawsuit asks for repayment of a $2.275 million loan with more than $51,000 in interest accrued as of late August. The mortgage on the property, held by Sky Bank of Ohio, secured the loan.
Now, Concannon said, “I’m trying to negotiate a deal to buy the note and the mortgage.”
It’s a complicated effort, one that he’s waging to keep his vision for the property alive despite massive changes in real estate, development and the local housing market.
Financing problems stalled demolition of the former church. This view of the southern side of its roof is visible from Main Street
Paula Gardner | AnnArbor.com
Concannon’s LLC bought the property - which includes the former church, the adjacent parking lot and vacant property at 401 N. Fourth Ave. - in 2005 for $2.35 million.
He planned the 11-story high-rise facing North Main, with 95 condos, ground-floor retail space, a floor of offices and 213 underground parking spaces. A four-story building with retail and 18 apartments was planed for the Fourth Avenue property.
In 2007, Concannon sought investors as partners to keep the deal moving forward. More recently, Concannon said he’d been negotiating with the bank for construction financing while the lender had been extending the loan over the downturn.
“At some point those negotiations broke down because they were unwilling to extend the underlying land loan unless we put more money (into the deal),” he said.
Lending has been an issue across the U.S. for two years, longer in Michigan. The dynamics behind the Gallery deal have changed with the market: As the loan market slowly comes back, developers will have to bring more cash to the deal. Concannon estimates now needing 50 percent down.
“So the amount of capital required is substantially higher than it used to be,” he said.
Concannon’s experiencing similar issues on other projects in the region: The Village Marketplace in Saline couldn’t get construction financing as retailers pulled out of the deal due to their own financing concerns; the site plans just expired. And 5th/3rd Bank initiated foreclosure against 425 E. Washington, the former Ann Arbor Professional Building, where Concannon planned to build a student housing tower. West Towne condos on West Liberty near Maple Road stand partially built and unoccupied.
“It’s not easy,” he said. “Every time we think we have one piece put together, then something happens in the economy.”
At the site of the Gallery, the resolution for the investors and the bank may not be reached this year, if the lawsuit proceeds. A settlement conference is scheduled for Oct. 4 in front of Judge Melinda Morris.
The bank’s attorneys have asked the judge to appoint a receiver on the property in addition to starting the foreclosure, according to the filing.
In the meantime, Concannon said he’s continuing his 16-month effort to secure financing.
“As soon as we can close … our intent is to demo the church immediately and construct the four-story building on Fourth Avenue,” he said. “We hope that will be sooner rather than later.”
More delays, he said, could permanently change that direction.
“If we don’t close on the the financing, we’re done,” he said. “It’s down to a point where it’s going to happen very, very quickly. Or it’s not.”
Paula Gardner is Business News Director of AnnArbor.com. Contact her at 734-623-2586 or by email. Sign up for the weekly Business Review newsletter, distributed every Thursday, here.
Comments
Moose
Thu, Apr 8, 2010 : 5:23 p.m.
What's with these folks? These folks are living in the past. The past of unsustainable development. The past of development financed on the taxpayers largess of tax abatements and zoning workarounds. The past of buying and building things that people don't want and then crying about it when the deal goes bad.
John Alan
Thu, Apr 8, 2010 : 2:02 p.m.
It is very interesting... Banks took all the bail-out money and were saved and now they are just NOT loaning much. It is mainly all local and national banks that are asking for 35%-50% down.... funny it is that everyone expects the economy to pick up and recover..... nothing will happen until the banks come to the game and start loaning again.... which dose NOT seem to be happening anytime soon!! On top of it..... city of Ann Arbor property taxes are another amazing thing...... real estate prices goes down, the financing is impossible, for re-financing, the appraisals are much less than SEVs.... and yet the property taxes and SEVs keep flying up in Ann Arbor.... I guess Banks and the city of AA treasury are enuogh reason to kill any desire to do any sort of real estate development and/or improvement in this town.
SMAIVE
Thu, Apr 8, 2010 : 1:02 p.m.
Saline, same old song and dance, only a much bigger mess with a large hole in the ground filled with water. Looking for money seems to be his refrain.
annarborguy
Thu, Apr 8, 2010 : 12:55 p.m.
Geez, Mr. Concannon thinks the bank is being "heavy handed" because they want him to live up to his agreement and pay them the money they have coming. They loaned him the money, he hasn't paid them, so they sue. Is that "heavy handed"? Would Mr. Concannon call himself "heavy handed" if one of his tenants in his fancy office building on Stadium didnt' pay their rent and he sued them? I think not.
LiberalNIMBY
Thu, Apr 8, 2010 : 12:36 p.m.
Great. Just what we need now -- more undeserving fodder for developer-bashing. "What's with these folks?" applies just as much to those on city council who don't allow redevelopment of other deteriorating properties around town.
Moose
Thu, Apr 8, 2010 : 12:02 p.m.
I suppose the picture is an example of Mr Concannon's fine work fixing up the city. Once again, another developer who had a good idea and no money to do it. What's with these folks?
russellr
Thu, Apr 8, 2010 : 11:13 a.m.
If you didn't have people like Mr. Concannon buying property and trying to fix it up Ann Arbor would be in shambles. I wish all you people with negative comments on what you would have done would have bought it and paid the taxes and done with it as you see fit. Until you have the deed in your hand shut up.
pmaa
Thu, Apr 8, 2010 : 8:23 a.m.
It's a shame that this property was allowed to deteriorate to this degree. After all, it was a place of worship and the physical site of countless weddings, baptisms and funerals and other important events. Any group that sold a property in good faith that it would be developed into a useful and esthetic new facility in a timely manner would feel very disheartened by what has happened here. The Greek community has a beautiful new church, social hall and classrooms in their new structure on Scio Church road. Please make sure you run a story on that too, perhaps around Greek Festival time in early June. The photos and story about these unfortunate people are not uplifting at all and to associate the Greek religion and culture, simply by circumstance, with them is negative and must sting deeply especially with the elders of the community. The Greeks never wanted this for their former church, nor the city to have such an unappealing eyesore in the downtown area. I hope the parties involved can move it along.
Craig Lounsbury
Thu, Apr 8, 2010 : 7:51 a.m.
"just forclose and make more parking available!" May I suggest underground parking. On top we can build a Counter Seasonal Geodesic Dome. This CSGD would be 78 degrees and sunny in January and 23 degrees and snowy in July. According to studies such a CSGD would attract an average of 2.3 to 74.9 million visitors a year who would spend on average $78-$512.
Paula Gardner
Thu, Apr 8, 2010 : 7:48 a.m.
Here's a little more info on Huntington Bank: It has a 3-star rating from Bauer Financial, with total assets as of 12/31/09 of $51 billion. It's based in Columbus, Ohio, and as of Dec. 31,its noncurrent loans were 5.76 percent of its loan volume, up from 4.05 a year earlier. Construction loans were 17 percent of that 5.76 total noncurrent loan list.
fortin911
Thu, Apr 8, 2010 : 7:02 a.m.
Ann Arbor needs more parking space downtown, just forclose and make more parking available!
DDOT1962
Thu, Apr 8, 2010 : 6:43 a.m.
Nice reporting, Paula. It sounds like a separate, more in-depth story could be done about Mr. Concannon and his developments-turned-fiascoes, as he seems emblematic of the overextension of credit and ambitions in our recent history. Keep up the good work.