PDIG properties in East Lansing now owned by the lender

Auctioneer Ingham County Deputy Sherriff George Lammers (Right).

This morning, two mortgages on seven properties at the west end of downtown East Lansing were auctioned by the Ingham County Sheriff’s office because PDIG had defaulted on its loans. The properties were sold to the lender, DDR MV City Center LLC, which is affiliated with Mountain Vista Real Estate Opportunity Fund I, LLC. No one else bid on the properties.

The properties include the former Citizens Bank building at Grand River Avenue and Abbot Road, the block of commercial buildings between that building and The People’s Church, and two boarded-up apartments at 341-345 Evergreen Avenue, adjacent to Valley Court Park.

As we reported yesterday, the minimum bids for the mortgages were set quite high. Developers would have had to bid on both of the two mortgages, on which the lender set minimum bids of $4 million (for the 2008 mortgage on six properties) and $7 million (for the 2013 mortgage that also included the bank building property).

Representatives of developer DTN were present at the auction, and Colin Cronin, DTN Vice President and Co-owner, told ELi earlier this week that DTN wants to acquire these properties. At Tuesday’s City Council meeting Council voted unanimously to choose DTN as developer for the publically-owned properties involved in the Park District project. Tom Kuschinski, Founder and President of DTN, said after the auction that $11 million was too much for a developer to invest in these properties. Instead, according to Cronin, DTN will wait and see what happens next.

Allen

The next step in this process is that PDIG has up to six months from today’s sale to buy back the properties. Under Michigan law (MCL 600.3232), there is a six-month redemption period following a foreclosure sale on any commercial property. During this period, “anyone with a legal interest in the property has a right to redeem” the properties, according to James L. Allen, the lawyer from Miller, Canfield, Paddock & Stone who represented the lender on the foreclosure sale.

The cost of redeeming the properties includes several components, according to Michigan statute. The first is the amount that was bid for the entire premises ($11 million) and interest from the date of the sale at the rate provided for by the mortgage, plus some small fees related to the sheriff’s sale and registration of the deed.

The redemption cost also includes taxes assessed against the property, amounts necessary to redeem senior liens from foreclosure, and insurance premiums covering any buildings located on the property through the redemption period. In order to redeem the properties, affidavits must be provided with evidence that these payments have been made.

The amount due on PDIG’s mortgages before today’s sale was approximately $38.5 million on a 2013 mortgage on seven properties and approximately $4.6 million on a 2008 mortgage on all the properties except the bank building. Following the foreclosure auction, PDIG can redeem the properties for a lesser amount of $11 million plus the costs described above.

Cronin said that DTN will move forward slowly to work on possible site plans for the Park District area. What happens to the ownership of the privately-owned properties will become clearer when the redemption period ends in early February 2016.