• Title: Strathmore Risk Investigation 
  • Author: Eliot Singer, East Lansing
  • Date: 10/30/2011

Strathmore Risk Investigation 

City Center II: Investigative Report: Why Strathmore Development Company Is A Huge Risk for the People of East Lansing

Preface

Anyone slightly familiar with finance and fiduciary responsibility knows not to take chances on somebody who has a history of losing “other people’s money.” Strathmore continuing to expect us to risk tens of millions in bonds for City Center II most reminds me of the final scene in Animal House where Hoover, amidst the chaos and destruction asks, “Can’t we please have one more chance?” Only this isn’t funny.

For years, long before I had a clue, concerned citizens have warned against Strathmore Development Company as a developer for a mega public-private project. Over time, more and more revelations have leaked out about foreclosures, unpaid bills and unpaid taxes, lack of credibility, huge losses to lenders, and so on. Just one of these revelations would have made any city official with the slightest sense of fiduciary responsibility call for a halt, whatever the embarrassment or extant cost.

Instead what we have gotten is lies, spin, excuses, cover up, and reassurances that have insulted the intelligence of the people of East Lansing. There has never been due diligence, unless you call speeding through one warning sign after another due diligence. The Lansing State Journal’s sycophantic acceptance of whatever garbage it has been told by the developer or city officials has set a new low standard, even for Gannet. How many times can they be told, “Financing will be completed soon,” before pointing out they’ve been told that before? “It’s a tough credit market” has become a very tiresome euphemism for a high credit-risk.

Just in time for the March 2011 installment of a last-minute request for renewal of the site plan by the Planning Commission, a new $97 million price tag was revealed, instead of the previous $116 million. The developer claimed construction costs had come down. Only the Producer Price Index for Construction Industries says otherwise. The East Lansing taxpayers who are expected to invest in City Center II have never been shown cost estimates from contractors. We don’t even know if there are any costs estimates from contractors. And we certainly don’t know whether the generic costs for the “public” parts of the project are a fair price.

Many people, including probably most members of City Council, continue under the impression if only the developer could come up with private financing that would be the end of the matter and City Center II would be built. This is a dangerously naïve misunderstanding. There is nothing in typical development agreements or mortgages or other financing to require a developer to spend the money on the project for which it was intended, instead of cannibalizing it for other projects, to pay off debts, or for central office expenses and executive compensation, then abandoning the project for lack of funds. A completed project may not generate enough new taxes (tax increment) and other revenues needed for debt servicing on bonds if it fails to live up to expectations or ends in foreclosure. And, without a reliable taxpayer, tax increment financing is impossible.

……………………………………………………………………………………

My investigation has involved identifying all the Strathmore projects and shell companies I could, looking at Registers of Deeds documents, assessment and tax records, court cases, and state business entity filings in Michigan and Florida, as well as using the internet to search for press releases, news stories, and miscellaneous sources, such as Loopnet real estate listings.

This research has revealed a company whose financial and legal troubles are shocking even to its heretofore harshest critics. This material is fascinating, in a train wreck sort of way—if you want to understand what happened to the economy, just look at National City’s bad loans to Strathmore. It is also tedious—yes, we get it: Strathmore cannot be relied on to pay taxes; it cannot be relied upon to complete projects, let alone financially viable projects. Except City Hall does not get it.

After a brief history (mostly about finance), the investigation is divided into three parts—about the development projects, about tax troubles, and about the mortgages on the City Center II properties—slightly edited from three separate posts previously published on Public Response. I have added details on size of mortgages, property values after foreclosures, etc. from which people can make their own guesstimates about how much of “other people’s money” has actually been lost—the public record, for the most part, can only allow for guesstimates.

Whether my intensive investigation will have more of an effect than the hard work of others before me I do not know. But by now, if the people of East Lansing lose tens of millions of dollars on a bad investment at a cost of two or three million dollars a year in cuts to public services, it is out of willful ignorance, and they have no one to blame but themselves.


A Brief History of City Center II (mostly about finances)

What has become known as City Center II conceptually dates back to before the Downtown Development Authority bought the former Old Kent Bank building at 303 Abbot with a MEGA $700,000 loan in 2001. None of the experienced, big-time, local developers was interested. Strathmore was, and in 2004, taking out a mortgage for slightly more than the sale price, it purchased the former Citizen’s Bank building on Grand River in 2004.

No market analysis was done. The original plan called for a much bigger project called Museum Place, but the project was scaled back when MSU backed out of moving its museum to the site in early 2008.

In mid-2008, with the economy and real estate market in freefall and with development projects throughout the country in trouble, the city made its full commitment to the developer and City Center II, with approvals of a site plan, development agreement, and brownfield plan.

The 2008 financing “plan,” the only one of record, specified:

(Private Development)
$10,452,390 in Borrower Equity-Contributed Capital
$49,122,045 in Private Financing
$16,593,316 in (Brownfield) Michigan Business Tax Credit
$5,852,544 in TIF Bond Proceeds
Sub-Total $82,020,295

(East Lansing Government’s Share, excluding $5,852,544 gift)
$3,931,862 in TIF Bond Proceeds for Parking Structure
$10,267,719 in Parking Revenue Bonds
Sub-Total $14,199,581 for the parking structure

$11,715,594 in TIF Bonds Proceeds for Brownfield Expenses
$8,500,000 in TIF Bonds Proceeds for Public Space (performing arts theater and exhibition space)

Sub-total city’s share $34,415,175 (excluding gift)

$116, 434, 470 Total Construction Costs ($40,267,719 from East Lansing bonds, including gift)

In August 2008, the State of Michigan approved a 30-year $57.8 million Brownfield Tax Capture plan, plus a $10 million MEGA business tax credit. The MEGA tax credit was significantly less than in financing “plan.” Whether this is still on the table is not known

The brownfield tax capture plan called for approximately $27 million in “qualified brownfield expenditures,” plus approximately $31 million for interest on financing. The qualified brownfield expenditures included approximately $18 million for a parking structure and $3 million for miscellaneous public infrastructure, with most of the rest going for site preparation and “pavement, concrete & structures.” Only $150,000 was for “abatement” (i.e., toxic clean up). There was no mention of an $8.5 million performing arts theater, and failed requests for stimulus money from the federal government in 2009 only asked for $1,500,000 to construct a 400-seat performing arts theater and $1,000,000 for public museum exhibit space. The initial post-completion taxable value, on the $82 million private development cost, was set at $20 million or $40 million market value, with baseline SEV at $2,630,000 (the pre-redevelopment assessment from which tax increment was calculated). Initial local tax capture was to be about $680,000 (39 mils) and school tax capture (24 mils from the state) was to be about $420,000, for a total of $1,100,000. This was expected to grow at an annual rate of 3.5% (inflation adjustment under Hedley). [The 2011 Baird debt service schedule for $34 million in city bonds, obtained through FOIA, uses the same amounts for the TIF component, with inflation expectation lowered to 2.5%, meaning the initial taxable value is unchanged, despite the supposed lower price tag, further evidence that taxable values are set in these plans to meet tax capture goals not at 50% of market value (SEV).]

In September 2008, City Council approved a $30 million intent to issue bonds resolution, and a drive to put it on the ballot failed. In May 2009, $5.495 million of the $30 million was issued as Bond Anticipation Notes to buy properties on Evergreen for the parking structure, which were purchased soon after for about three times their market value.

Since then, all has been delays and mostly silence. The development agreement lapsed. A revised site plan, with fewer condos and more office space, was approved for two years by City Council in April 2010, after delinquent 2008 and 2009 property taxes were finally paid. In March 2011, the Planning Commission renewed its one-year approval of the site plan before delinquent taxes were paid. In May 2011, the Historical Districts Commission was asked to approve tearing down the historic houses for the parking structure, although the law specifies they cannot be torn down until all agreements and financing are in place (among other things, there is no development agreement and no financing). There has been occasional positive spin, usually when the developer or City Hall wants to counter negative revelations, with the ever-loyal LSJ happy to do its bit for the cause. City Council has steadfastly avoided putting City Center II on its agenda since April 2010. Much has gone on in secret. Some citizen-whistleblowers, at great expense, have been trying to keep tabs. And, I have been learning more about the underbelly of commercial real estate finance from the public record than I ever wanted to know.


Batting 0-for-13: The Strathmore Development Track Record

The 13 projects to which I refer are the ones I have been able to identify with Strathmore’s limited liability affiliates (a.k.a., shell companies) since that name was adopted in 2000. All of these developments appear to have lost “other people’s money,” all told lots and lots and lots of it, although an exact amount cannot be calculated from the public record.

Strathmore’s president did complete a few small development projects under limited liability companies prior to Strathmore, of which the renovation of the former Masonic Temple on M.A.C. in 1999 for around $1-$1.5 million and the redevelopment of 311/315 W. Grand River (Gumby’s) also for around $1-$1.5 million c. 2001 are most notable in possibly helping understand how city officials’ love affair with Strathmore began—perhaps it is donations for the Art Festival or perhaps something else. All these have since been sold, along with the many rental properties under several earlier shell companies, whether for what was owed on the mortgages or not is unclear from rough calculations.

But neither Strathmore nor its predecessors has ever come close to carrying out a development that remotely resembles the size, complexity, design, expense, or risk to municipality finances of City Center II. The only other mega public-private project on the drawing board was Broadway Village.


1) The Pointe (intersection of Saginaw and Grand River near Frandor)
• 29,439 square foot East Lansing brownfield redevelopment completed in 2005, consisting of a one and a two-story building, with a branch of Fifth-Third bank as “anchor.”
• Headquarters to Strathmore and formerly to its Terra Management parent.
• $1.4 million in Brownfield tax incentives, including $485,000 in local “tax capture,” and supposed to “attract” $7.8 million in private investment.
• Sold to the creditor, LNR Partners, a leading “special servicer” for distressed mortgages, at an Ingham County Sheriff’s foreclosure auction in May 2009, with $9.1 million owed on two mortgage notes.
• Sheriff’s deed sold to present owner, Saginaw Investment Group, when not redeemed by Strathmore’s Pointe investment Partners affiliate, for $3.85 million.
• City officials knew about this foreclosure on an East Lansing brownfield and covered it up.
• Sources: Ingham County Register of Deeds, East Lansing tax and assessment records, MEGA press release, Strathmore brochure, and FOIA.

2) East Lansing Former Department of Public Works Facility (Merritt Road)
• On April 3, 2007, City Council approved an application by Strathmore’s CADA Investment Group affiliate, including of a “concept plan approval for a ten unit office condominium on the 21.24 acres of the former Public Works site…and site plan approval for a two story 40,000 sq. ft. Medical Office Building on unit 9 at the northeast corner of the proposed 10 unit office condominium” (Council Meeting Synopsis).
• As listed on Loopnet, from November 4, 2004 (?), last verified July 27, 2008: “Strathmore Development Company is currently engaged in the rehabilitation and redevelopment of a 21.24 acre site, which is currently the Department of Public Works for the City of East Lansing, utilizing Michigan's Brownfield legislation. This project will contain 115,000 square feet of professional office and medical office. There are three 5,000 square foot buildings; six 10,000 square foot buildings, and one 40,000 square foot medical office building. Pads for sale; suites for lease.”
• City Council approved the sale of much of the former DPW site to Spartan Technologies in November 2010. Exactly when Strathmore exited the picture has not been traced.

3) Woodland Lakes Apartments (Holt/Delhi Township)
• 344-unit, multi-building, 2-story apartment complex built in 2003-2004.
• Apparently a Delhi Township brownfield (details not obtained).
• Consortium of creditors holding mortgages took control of Strathmore’s Woodland Lakes Investment Group affiliate in July-September of 2008—Key Bank (original 2003 principal of $24 million, later modified with a mezzanine finance component); Hartford Life Insurance Company (original 2005 principal of $24 million); Hartford Mezzanine Investors (original 2006 principal of $3.34 million).
• The assessed market value of Woodland Lakes Apartments in 2010 was $12,321,200
• In June 2010, Hartford Mezzanine Investors won a $5.5 million settlement in a suit against Strathmore’s president and other guarantors, but had to settle for little after claim of inability to pay.
• Sources: Ingham County Register of Deeds, Delhi Township tax and assessment records, State of Michigan business entity records, Hartford Mezzanine Investors federal court case, miscellaneous internet.

4) Foley Towne Square and Silver Lake Hills Apartments (Fenton)
• Strip mall and apartments under separate limited liability companies and mortgages completed 2001-2002.
• 17 3-story apartment buildings, with 18 one or two bedroom apartments per building (306 units), and three one-story brick-façade retail buildings of 25,729 sq. ft., 10,960 sq. ft., and 5,778 sq. ft. (42,500 sq. ft. total).
• A Walgreens that was conceptually part of the strip mall was deeded for nothing and not built by a Strathmore affiliate.

• Foley Towne Square was sold at a Genesee County Sheriff’s foreclosure auction on October 9, 2009, to a creditor, CSFB 2005 CE Foley Town Square LLC (Credit Suisse First Boston), and after the redemption period was transferred to JE Roberts Companies, representing CSFB and probably also Key Bank.
• CSFB had obtained a $6 million December 2004 mortgage (not then distressed) that had about $5.7 million remaining at the time of foreclosure. Also involved appear to have been a $373,029 2005 CSFB mezzanine loan and a 2002 Key Bank Association mortgage in the original principal amount of $5,122,500.
• At the time of foreclosure CSFB valued Foley Town Square at $3.5 million, in line with the 2010 assessed market value of $3,341,000.
• The new owner has been trying to sell, as the Strathmore affiliate tried before it.

• Silver Lake Hills Apartments went into receivership in July 2009, with the creditor, Michigan Business Connection (a consortium of Michigan credit unions with a mandate to provide affordable financing to Michigan small businesses and real estate investors) taking final ownership via a “deed in lieu of foreclosure” in October 2010.
• The October 2008 mortgage had been in the original principal of $16,500,000.
• The assessed value market in 2010 for the two tax parcels for Silver Lake Hills Apartments was about $12 million.
• One of the Silver Lake Hills apartment buildings burnt down on February 13, 2009, with three people hospitalized, including a baby, and tenants losing everything. Observers expressed surprise at how quickly it burnt. Some who were caught in the fire said alarms and sprinklers did not go off in a time.

• Sources: Genesee County Register of Deeds, Fenton tax and assessment records, Loopnet listings, news accounts of fire with comments.

5) Columbia Lakes (sprawl subdivision near Mason)
• In the works since 1999, but only a small fraction completed.
• Vivid description of near abandonment in City Pulse, December 16, 2009, “…Planned streets dead end after a few feet and weeds poke up through the snow in empty lots. One plot, overlooking the lake, has just a foundation and looks like construction was halted long ago — there’s a sapling, maybe 10 feet tall, growing out of the foundation. ‘No trespassing’ signs hang on a fence cordoning the foundation, and in front is a Strathmore Development Co. sign advertising that it’s for sale….”

• In tax and mortgage trouble, Columbia Lakes was lost via deeds “in lieu of foreclosure”/duress sale in December 2009-January 2010.
• The less developed portion was foreclosed on by BLB-SRO, who had been assigned four extant Columbia Lakes Investment Group (distressed) mortgages to Fifth-Third Bank (and its predecessor, Old Kent Bank): to Old Kent Bank in 1999 for $720,000 and $1,120,000; to Fifth-Third Bank in 2005, for $6,630,000 (for construction costs for phase 1 of Columbia Lakes), amended January 5, 2006 to add an additional $1,500,000; and to Fifth-Third Bank, November 30, 2007, for $4,032,800. These total to about $14 million.
• Although sales of lots and a home on the main streets on the edge of the development in 2000-2002 were discharged from an earlier Union Irwin Bank mortgage, of the 20 plus lots and homes in the main development sold for about $4 million in 2006-2007, only two lots, for about $80,000 combined, are shown as discharged from Fifth-Third Bank mortgages prior to foreclosures.

• The more developed portion was sold under duress to affiliates of Allen Edwin Homes in three separate transactions for $1.3 million. Allen Edwin also took control of the Columbia Lakes association.
• In January 2010, the reported $129,206 in tax forfeitures plus a second November 30, 2007, Fifth-Third Bank mortgage for $4,032,800 were discharged.
• Since obtaining its part of Columbia Lakes, Allen Edwin appears to be having considerable success selling lots and prefab homes for about 30% less on the average than the Strathmore sales of 2006-2007.

• Sources: Ingham County Register of Deeds, Aurelius Township tax and assessment records, City Pulse

6) Nixon Farms (sprawl development in Delta Township)
• In the works since 2000-2001, imposed by a court settlement against the wishes of the township. The Delta Township clerk commented: “In one single action our plans for the quality of life for our residents is destroyed and, I believe, a dangerous precedent is set. I believe this is the most devastatingly thoughtless act of greed I’ve ever seen.”
• Court settlement specified: 263 manufactured home sites, 440 apartments, and 65,500 square feet of small business commercial space.
• Parcels sold to affiliates of Gillespie Group in 2002 and MacKenzie E.T. in 2004 (probably connected to a construction lien) resulted in the mixed-success Townsend on the Park Condominiums and the partially completed Village Place at Grand Ledge subdivision.
• The Strathmore affiliate retained the intended commercial site. It has never been built on and has been listed for sale for years, prompting a comment at May 10, 2010, meeting of the Delta Township Planning Commission, that “the 12 acres located at the southwest corner…has been zoned commercial for eight years and to this point, there hasn’t been any development proposals [sic] made.”
• In April 2011, the 2003 Fifth-Third Bank mortgage, in the original principal of $3,690,000, on the intended commercial site was “assigned.”
• This parcel had an assessed market value of $956,6000 in 2010.
• Sources: Eaton County Register of Deeds, Delta Township tax and assessment records and minutes, news stories, and Loopnet listings.

7) Broadway Village (Ann Arbor)
• City Center II on steroids, an enormously ambitious public-private development, in planning for nearly a decade, with an estimated cost of $171-$200 million and government subsidies and tax incentives up to $100 million.
• Like City Center II, the site plan morphed repeatedly. At the time of the highly publicized groundbreaking on January 10, 2008, Broadway Village was supposed to entail 152,689 square feet of general and medical offices, 138,275 square feet of retail, 185 upscale rental apartments, and a 760-car parking structure. The developer claimed most of the $165 million in construction financing was in place.
• The state pension plan (SMRS), through Morgan-Stanley, made a $20 million equity investment in October 2007, which replaced mortgages used to buy 9 properties between 2004 and 2006 for $11,402,250.
• Shortly after groundbreaking the work stopped. For the next six months promises and excuses were made.
• Clark Construction, one of the planned City Center II lead-contractors (and others) settled approximately $3 million in liens for $1.6 million.
• Extolled by Governor Granholm at the groundbreaking as “right in the sweet spot of what we should be doing,” an August 2010 report in Arborweb (still valid) described what remained of the Broadway Village mega public-private redevelopment as an “unmowed field ringed by a chain link fence” still leaking toxins into the river.

• At one time, Ann Arbor was supposed to provide $40 million in bonds, to be paid for by tax increment financing, but its City Council, some of whose members had always been skeptical, demanded substantial preleasing of the commercial space, and eventually voted down the bonds. In 2008, as financing was unraveling, MEDC was considering $40 million in bonds, but only to be issued after the project was completed to replace private financing used for construction.

• There is an ongoing lawsuit between the Morgan-Stanley majority limited liability company that was deeded the properties by the Strathmore-only affiliate, after the pension plan investment, and Lawyers Title Insurance over whether the insurer should have to pay for the $1.6 million lien settlement. The dispute involves an affidavit filed by Strathmore’s president swearing no work had been done on the property for 120 days prior to the “sale” (so there would be no new liens as yet unfiled). The plaintiff stated, “The facts set forth in the affidavit are false.” On this one point the defendant (the insurer) agreed, “The Affidavit is false.” In August 2011, the judge refused to dismiss a third party suit against Strathmore, its president, etc. over the alleged false affidavit.

• Sources: Washtenaw County Register of Deeds (Larry Kestenbaum, Register), Ann Arbor tax and assessment records, news accounts from Arborweb and MLive, State of Michigan business entity records, Lower Town Project v. Lawyers Title Insurance.

8) Bear Creek (Petoskey)
• Sprawl development imposed against the will of citizens by a court settlement.
• Two sets of apartments—each of 20 2-story buildings with a total of 120 units—completed in 2006-2007.
• Lowe’s was sold a parcel for $0 and built its own store in 2006.
• Of the Strathmore affiliate’s intended commercial 131,000 square footage, only a 28,000 sq. ft. building and two 9000 sq. ft. buildings were built.

• One set of apartments and the strip mall, mortgaged by two different affiliates (Bear Creek Partners II and Petoskey Investment Group) to National City, went into receivership in March 2009.
• “Combined, the loan defaults involve principal of more than $23 million, plus interest - some $267,000 had accrued as of late 2008 - and various late charges…. ‘A receiver is necessary to collect the rents from the projects, and to apply those rents to the outstanding taxes, the indebtedness and the maintenance and operation of the project. Borrowers and their successors are receiving monthly rental payments and other receipts from commercial, retail and residential tenants at the individual developments that comprise the project," the bank's legal counsel states in court documents’” (Ryan Bentley, Petoskey News-Review, March 11, 2009).
• In May 2010, National City assigned the mortgages to Matrix Advisors BC, LLC, an affiliate of Colony Financial, that picks up “sub-performing or non-performing loans.” Apparently the properties are no longer in receivership after the majority ownership of the limited liability companies changed hands (details are unclear).
• The 2010 combined assessed market value of these properties was about $10.5 million, although other evidence suggests the apartments sale value may be $2 million not $4 million (see below).

• In December 2006, the first set of completed apartments was released from its National City mortgages and remortgaged by Bear Creek Partners I to a different lender for $9.6 million, with the mortgage quickly passed around.
• On November 5, 2008, CW Capital, “special servicer” for the Bear Creek Partners I mortgage, filed for foreclosure, and these apartments were placed in receivership in March 2009, where they remained.
• In a 2010 Chapter 11 bankruptcy reorganization attempt for Bear Creek Partners I it was stated that the amount owed on the mortgage was more than $12.5 million and that attempts to sell the two sets of apartments combined had never produced bids of over $4 million.
• In his October order rejecting the reorganization the judge wrote: “The court is mindful that the petitioning creditors had pinned any hope of payment on this proceeding under title 11, but the combination of a grossly undersecured creditor, lawfully dispossessed debtor, and well-settled legal principles doomed this case at its inception…. The court concludes that perpetuating this proceeding would be an exercise in futility, certain to spawn unreasonable delay and expense that the estate cannot bear.”
• Fryling Construction, another would-be City Center II lead contractor, was unable to collect on an unpaid lien.

• In November 2010, the state appeals court upheld a lower court ruling rejecting a lawsuit against Bear Creek township and sewer authority, asking for about $6 million in damages for delays on the Bear Creek project, which were blamed by Strathmore for its financial troubles.
• The township and authority have spent close to $1 million defending themselves.
• On one point involving the feasibility of constructing a private sewer system, the appellate judges acquiesced to the lower court’s decision that the sewer authority’s contention that a private system was feasible was more credible than Strathmore’s president’s claim that it was not. ‘[T]his court defers to the trial court on issues of credibility.’
• In the lower court, “When asked during his recent deposition whether his firm ever performed a feasibility study for its proposal, [Strathmore’s president] said: ‘I am not even sure it was even a written feasibility study. It could have been something I just went through and analyzed and not kept hard copies of. I would have to go back and look at the files’” (Michigan Land Use Institute, April 28, 2008).

• Sources: Emmet County Register of Deeds and tax and assessment records, Bear Creek township court cases, Bear Creek Partners I bankruptcy proceedings, State of Michigan Business entity search, news reports by Michigan Land Use Institute and Petoskey News-Review, Strathmore brochure, and Loopnet listings.

9) Alico Lakes (Fort Myers, Florida)
• Large sprawl development near the interstate, dating to September 2005, announced as “including a national hotel franchise, a large furniture retailer, and numerous restaurants and other users,” with construction to commence in June 2006. A commencement notice was not filed until August 2007.
• Strathmore bought Alico Lakes Village for $13,500,000 on September 13, 2005, taking out an initial mortgage with National City Bank for $18,427,500, shortly after adding a $2.5 million National City mezzanine loan. In September 2006, the main mortgage was increased by $14,575,000 to over $33 million, a total of $35.5 million in mortgages.
• Tracts were sold for $2.7 million to an unaffiliated group of investors to build a Holiday Inn and convention center, for $4.35 million to City Furniture, and for $1,393,920 to Chick-Fil-A, all of which completed their buildings in 2009.
• Strathmore’s Southwest Florida Investment Group affiliate apparently did build in 2009 a 7-Eleven, originally planned for commencement in November 2006.
• A one-story and a two-story commercial building, the latter of which was supposed to host Strathmore’s Florida headquarters, were partially built in 2008, before the work stopped, with numerous large contractor liens.
• In March 2009, National City filed for foreclosure on the Strathmore affiliate’s remaining Alico Lakes properties.
• In April 2010, PNC (National City) assigned its mortgage, and shortly after the unfinished one-story building was sold for $950,000, the mortgage assignee obtained the other tracts (7-Eleven, two-story building shell, some empty lots) through a “deed in lieu of foreclosure” for a value of $2.19 million.
• Sources: Lee County Register of Deeds and tax and assessment records, Strathmore press release.

10) Bonita Exchange (Bonita Springs, Florida)

• Bonita Exchange, as announced in an April 2007 press release, was supposed to be a 23-acre development with a 125-room hotel and 300,000 square feet of commercial space to be completed by the end of 2008.
• Nothing but some incomplete infrastructure work was done.
• In February 2011, Comerica assigned its $22 million February 2007 (presumably distressed) mortgage of Bonita Exchange by Strathmore’s Bonita Real Estate Partners affiliate to the same limited liability company that owns the Alico Lakes properties.
• The combined 2010 assessed market value for the 8 parcels was $1,782,017.

• The assignee released the mortgage, after a joint new mortgage from a Dallas lender-speculator on Bonita Exchange and the empty Alico Lakes parcels.
• This mortgage, unlike others, has a list of rules and restrictions designed to make sure the money is spent completing the infrastructure work on Bonita Springs: “As a condition of Lender making the Loan…[Bonita Real Estate Partners] has agreed to perform and complete certain improvements to the Bonita Exchange Property (including, but not limited to, the construction of certain roadways and other infrastructure, site work and structural improvements thereof). Within forty-five (45) days from the date hereof, [BREP] shall provide to Lender, for Lender’s review and approval, a construction schedule, budget, plans and specifications, construction contracts and other such documents and information…. Thereafter, [BREP] shall commence such property improvement and pursue completion of the same, diligently and in good faith…. Prior to commencement of each phase of work and pursuant to the approved budget, Borrower must deposit into a pledged account (at a lending institution and pursuant to a written agreement reasonably acceptable to Lender) the necessary funds (plus sufficient contingency) for that portion of the work…. Pursuant to an approved draw schedule, Borrower may periodically…request a release of funds from the account by submitting a draw request and progress report (including invoices…photos, inspection reports…) evidencing completed work…. Requested funds will be released after Lender verifies that the work in question adheres to the progress report and the approved Construction Documents. Grantor shall keep Lender apprised of the progress and status of such work with monthly progress reports…. Borrower shall furnish…Quarterly Financial Statement[s]…for Strathmore Development Company….”
• Sources: Lee County Register of Deeds and tax and assessment records, Florida business entity search, Strathmore press release.

11) Gibsonton Square (Tampa, Florida)

• Gibsonton Square, dating to the Spring of 2007, was supposed to be a 30-acre development adjacent to a Walmart, with a hotel, over 125,000 square feet of retail space, and nine out lots (for further development), to be completed by the spring of 2008.
• Bonita Real Estate Partners bought 5 parcels for the development for $8.85 million from two owners in April 2007, taking out a mortgage with National City for $28,000,000. To this was added a junior mortgage/mezzanine loan, with National City for $7,000,000 for infrastructure work, etc.
• Little or nothing except surveying was done.
• In February 2009, National City Bank filed for foreclosure on the two mortgages of a combined original principal of $35 million.
• In April 2010, the mortgages were assigned by PNC/National City, and shortly after, the assignee was deeded the properties “in lieu of foreclosure.”
• The assessed market value (as well as the size of a mortgage by the new owner) is about $1.75 million.
• Sources: Hillsborough County Register of Deeds and tax and assessment records, Strathmore press release.

12) Center of Bonita Springs

• In November 2007, Strathmore affiliates, Center of Bonita Partners, LLC, and Tamiami Investment Properties, LLC, purchased a “dilapidated” shopping center, built in 1988, in Bonita Springs, Florida (near Fort Myers) for $41 million.
• The Strathmore affiliates took out two mortgages with National City Bank, the senior loan for $38,191, 078 and the “second-priority mortgage” for $4,200,000.
• The plan was to spend an additional $10 million on renovations, first exterior cosmetic work then some reconstruction with the hope of bringing in more upscale businesses. About half of the exterior stucco refurbishing was done in 2008 during the Florida offseason (after the “snowbirds” leave).

• “Then work stopped. While half the center stood unfinished and many of the center’s storefronts were empty, National City Bank filed a foreclosure suit in early March [2009] claiming the Center of Bonita Springs Partners LLC owed $38 million…. According to Lee County documents, National City Bank [contended] the company defaulted on loan payments in November and December 2008 as well as in January. [Strathmore’s President] said in an e-mail interview that the suit brought on by National City Bank was because the project’s ‘loan restructuring has taken longer than anticipated given the condition of the credit markets.’ He said he expects that the restructuring will continue within 30 days. [He] also said in an interview last week Strathmore had ‘to increase the size of the construction loan’ for the project once it saw a need for additional improvements to the center…. The facelift will be completed by summer and ‘will be exactly what was intended’” (June 28, 2009 article, by Jennifer Larino for the Naples Daily News).
• Center of Bonita was placed in receivership then, on August 21, 2009, the senior mortgage was assigned to AAG Bonita Springs, an LLC of the Israeli real estate company, Aviv Arlon Global. The Lee County Court awarded the property to AAG Bonita Springs on January 8, 2010.
• A May 2010 private assessment for the Israeli company appraised the shopping center at $27,275,000, plus $1,820,000 for the ground lease.

• In July 2009, Mountain Vista Real Estate Opportunity Fund I filed suit for breach of contract on a mezzanine loan against the Strathmore affiliates and personal guarantors for the Center of Bonita Springs development, asking for $10.875 million.
• The case was voluntarily dismissed after the $10.875 was attached to the Huntington Bank mortgage, assigned to Mountain Vista and amended January 25, 2010, on the six properties owned by City Center Two Project, LLC.
• Sources: Lee County Register of Deeds and tax and assessment records, Naples Daily News, Strathmore press release, Mountain Vista Real Estate Opportunity Fund I v Center of Bonita Partners, LLC, and Tamiami Investment Properties, LLC,

13) City Center II (East Lansing) …



"We don't pay taxes. Only the little people pay taxes”—Leona Helmsley.

A History of Property Tax Delinquencies and Forfeitures

Although foreclosures on over-leveraged Strathmore developments did not begin until after East Lansing government signed the 2008 City Center II development agreement (but before the foolhardy purchase of the Evergreen properties), there was already more than ample evidence (including that provided by citizen-investigators) that Strathmore was far too big a risk for a mega public-private project involving tens of millions of dollars in taxpayer-backed city bonds and MEGA business tax incentives from its tax delinquencies, if nothing else.

City Center II requires substantial tax increment financing for “debt servicing” on bonds—averaging about $1.6 million (of $2.3 or $2.6 million total debt servicing) per year according to the $34 million Baird debt service schedule (accepting its high parking revenue expectations), more than $2 million in the 2008 brownfield plan. Obviously, this requires a reliable taxpayer. Strathmore’s property tax delinquency history prior to the signing of the development agreement should have precluded its consideration for any project involving TIF for bond servicing. The excuse that “everybody does it,” when it comes to developers not paying property taxes as a cash flow strategy, is another lie. Any developer with adequate financial resources to tackle a major project pays the taxes on properties awaiting future development, and it pays mortgages and contractors.

Before the 2008 development agreement, Strathmore’s CADA Investment Group “affiliate” already had forfeited to Ingham County the former Citizen’s Bank building, purchased in 2004, for $81,360.96 in unpaid 2005 property taxes (plus interest) and $65,599.28 in 2006 taxes (plus interest). A lesser City Center II building, 136 W. Grand River, purchased in 2006, was forfeited to the county for non-payment of 2006 winter taxes. Even if redeemed before going to tax auction by the county sheriff, by time these forfeitures are paid, it is sometimes more than two years after summer taxes were due—the forfeiture on 2005 taxes, of which $62,307.91 had been due August 31, 2005, was not redeemed until March 27, 2008. Both these properties were also delinquent on summer and winter 2007 taxes, which were transferred to the county, but paid before forfeiture in the context of the development agreement. Of course, as we well recall, all seven City Center II properties (the rest purchased in 2008) were delinquent on 2008 and 2009 taxes, after the development agreement was signed, and these taxes were only paid when they were because of the need for the CC II site plan revision approval by Council, which followed the infamous $99,000 on a credit card incident. 2010 taxes were still unpaid when the Planning Commission approved an extension.
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Other Strathmore projects were replete with property tax delinquencies and forfeitures, with some developments, such as Broadway Village, Nixon Farms, and Bear Creek, almost every year, the last even after it was producing revenues. Unpaid taxes were anything from a few thousand to hundreds of thousands of dollars. During its brief ownership by Strathmore affiliates, before foreclosure, the Center of Bonita Springs shopping center, home to a supermarket and other major lessees, had approximately $360,000 in delinquent 2007 property taxes and approximately $450,000 in delinquent 2008 taxes. As quoted in the Naples News-Press, May 15, 2009, concerning $397,603 listed for the annual Lee County delinquent tax auction, Strathmore’s president said, “We are in the process of refinancing…and that is why we haven’t paid.” In 2008 and 2009, the State of Florida Department of Revenue issued warrants against Strathmore’s Center of Bonita Partners for collection of delinquent sales and use tax in the amounts of $76,587.75 and $101,339.66.

Because county governments bend over backward to avoid tax foreclosure auctions, the system can easily be abused by serial tax delinquents. A Bay Harbor Yacht Dock near Petoskey, owned personally by Strathmore’s president, has had annual tax delinquencies since 2006, always redeemed in time to keep the property from the sheriff’s gavel. (A Harbor Springs, “tunnel of trees,” home was gaveled in a 2009 Emmet County mortgage foreclosure auction.)

The attitude of city officials (and the developer) has persistently been, once taxes are finally paid, “what’s done is done” (or using the spin of certain former presidents caught figuratively or literally with their pants down, “it’s all in the past”). But risk assessment involves predicting future behavior from past behavior—this is why diligent bill payers worry about their credit scores any time they inadvertently forget—so the correct risk assessment perspective for a persistent pattern of property tax delinquencies and forfeitures is, “what’s done cannot be undone.”

IRS and State of Michigan Tax Liens

As reported in The State News on July 6, the IRS filed a personal income tax lien against Strathmore’s president, dated June 16, for $496,659.20 owed for 9 quarters, June 2007 through June 2009. Ex-City Manager Ted Staton’s comment that, “A careful review of the matter demonstrates that the amount of the tax lien is in dispute,” for a lien that references a tax form used by the IRS after the amount owed has been appealed, may help explain why he is an -ex. The State News reporter was told that a State of Michigan income tax lien, dated March 14, 2010, for $107,540.19 owed in 2007 and 2008 taxes had already been paid, but the record shows a payment date several days after the interview.

What The State News failed to report was the State of Michigan tax liens on Strathmore Development Company and the IRS tax liens on Terra Management Company.

As of October 13, 2011, the State of Michigan has four outstanding tax liens against Strathmore Development Company for unpaid employee withholding taxes on file with the Ingham County Register of Deeds: $10,479.57 for April to June 2010; $3,502.11 for July and August; $7,077.98 for October and November; and $4,448.91 for December 2010 and January 2011. There is also a lien on record from the Michigan Department of Labor and Economic Growth for $4,315.85 in unpaid unemployment insurance from January to April 2010. The IRS tends to be slower than the state in filing tax liens, so it is certainly possible that a company that failed to pay about $25,000 in state employee withholding taxes between April 2010 and January 2011 also failed to pay Form 941 federal taxes for something on the order of ten times as much.

The IRS has three outstanding Form 941 tax liens against Terra Management Company, Inc. for a total of close to $900,000: $842,198.80 for December 2007 through June 2009; $43,683.19 for the quarter ending September 2009; and $2,812.46 for the quarter ending December 2009. (Form 941 combines withheld employees’ income taxes and withheld employee/employer Social Security and Medicare.) Previously, in August 2007, the IRS filed a tax lien against Terra Management for $56,038.15 on unpaid Form 941 taxes for the tax quarter ending March 31, 2007, which was discharged (marked as paid) on September 21, 2007.

The State of Michigan had withholding tax liens against Terra Management of $20,895.27 for March through August 2009 and $14,088.46 for September through December 2009. The latter, dated April 15, 2010, was released May 25, 2011, and the former, dated October 28, 2009, was released on June 20, 2011. Terra Management still has State of Michigan unemployment insurance tax liens for $3,101.98 from July 2007 through December 2008, $1,917.40 for July through September 2009, and $4,794.51 for April through June 2009.

There are signs that an attempt is being made to erase Terra Management Company, probably the principal business of Strathmore’s president since its incorporation in 1997. Terra Management left Suite 200 of The Pointe late in 2010, and the entire operation is now in the much, much smaller Suite 150, under the Strathmore name, with Terra Management boxes piled high, at least on last observation. (Strathmore did not previously have its own acknowledged office for which it paid rent or personal property taxes.) On March 5, 2010, the Assistant Treasurer of East Lansing swore out a Jeopardy Tax Assessment Affidavit against Terra Management for $4,206.56 in 2010 taxes on personal property valued at $66,000—a Jeopardy Tax Assessment Affidavit for personal property taxes is required by state law when seeking advanced payment if there is reason to fear taxes will not be paid and is usually only issued when there is likelihood forfeiture of property to pay off taxes will not be an option in the future (e.g., business closure). (Unlike another Jeopardy Tax Affidavit of the same time, this one was discussed with the City Manager, and includes no meaningful explanation, as required, on the document.) Based on the State of Michigan tax liens, it may be surmised payroll has shifted from Terra to Strathmore. Terra, which had not filed its required annual report with the Michigan Department of Licensing and Regulatory Affairs since May 2008, was automatically dissolved on July 15, 2011.

Terra’s Tax Troubles Are Strathmore’s Tax Troubles

None of this will allow Terra to escape from the nearly $900,000 in IRS tax liens, as if walking away from a limited liability company’s National City mortgage with nothing to lose but a property worth a fraction of the debt.

In its latest incarnation, Strathmore Development Company Michigan, and its Florida counterpart, are limited liability companies formed respectively in March and February 2007. From 2000-2007, Strathmore had been the assumed name of its president’s incorporated development company (founded in 1997).

According to a September 27, 2010, organizational chart provided for the failed Bear Creek Partners I Chapter 11 bankruptcy petition: both Strathmore Michigan and Strathmore Florida limited liability companies are 95% owned by Terra Holdings, LLC, of which Strathmore’s president is 90% owner (5 staff members each own 2%); the other 5% of the Strathmore LLCs are owned by a company (Covenant Investment Group, Inc.) belonging to his wife.

Despite interposing the Terra Holdings shell company, formed in October 2007, more than six months after the Strathmore LLCs, from the public record alone it is easy to trace everything to Terra Management. This means the IRS tax liens on Terra Management probably can and probably will be imposed on Strathmore Development Company Michigan and any assets it may have. Terra seeking Chapter 11 bankruptcy protection would, of course, mean a total halt until that was worked through, but given that debt likely vastly exceeds collateral, it is safe to predict this attempt at restructuring would be “doomed from the start.”


A Distressed Mortgage Does Not Simply Vanish

City Center II Properties and Mortgages

CADA Investment Group, LLC, an “affiliate” of Strathmore Development Company (actually of Terra Management Company, Inc.) bought 100 W. Grand River from Citizen’s Bank on October 18, 2004 for $1.7 million, taking out a $1.8 million “continuing collateral mortgage” with Comerica Bank. This mortgage has been in persistent default in regards to provisions requiring the mortgagor to “keep the Premises in good repair,” not to allow “any loss, theft, substantial damage or destruction to or of any of the Premises,” and to pay all taxes “when due, and before any interest, collection fees or penalties accrue or default occurs.” Comerica has not enforced the mortgage. There is nothing in the public record to suggest CADA has defaulted on payments of principal and interest to Comerica.

CADA Investment Group purchased 136 W. Grand River from Taipei Express for $660,000 on January 20, 2006, taking out a $524,8000 variable interest rate 2-year mortgage with Dart Bank. In the first half of 2008, CADA purchased five additional properties for City Center II: on January 31, 130 West Grand River from Ballein Management for $300,000; on May 30, 124 West Grand River from Jennifer J. Swan Trust for $485,000, 128 West Grand River from Charles J. and Nancy J. Poquette for $300,000, 140 West Grand River from Theda Assiff-MacGriff Trust for $450,000, and 341-345 Evergreen from DTN Management for $2,400,000. All these properties, along with the previously purchased 136 West Grand River, were transferred to a new Strathmore “affiliate,” City Center Two Project, LLC, on June 2, 2008, and mortgaged for $3,575,000 to Huntington National Bank; the Dart Bank mortgage on 136 Grand River was discharged on September 15, 2008. (The former Citizen’s Bank property remains under CADA Investment Group and the Comerica Mortgage.)

The Huntington National Bank Near-Foreclosure

On July 9, 2009 a public notice was published in the Legal News announcing: “FORECLOSURE NOTICE MORTGAGE SALE - Default has been made in the conditions of a certain mortgage made by City Center Two Project, LLC, a Michigan limited liability company, Mortgagor, to The Huntington National Bank, Mortgagee, dated May 29, 2008….” A foreclosure sale date was set for August 13.

East Lansing government’s PR machine went into damage control mode, bashing and trying to intimidate The State News for reporting the foreclosure notice and blaming everyone but the developer and itself. The State News published a story on July 15 under the headline, “City Center Not Foreclosed, Huntington Notice Was a Mistake.” Strathmore’s President “said the notice was an error and the company has resolved the issue with Huntington National Bank.” Huntington’s VP of Special Assets was quoted as saying, “’Our attorney did send the notice, but then negotiations continued with our customer and we tried to stop the Legal Times from publishing it, but, unfortunately, we were too late.’” “City Manager Ted Staton said the project is up to date and nothing has fallen behind. ‘I know from our standpoint, everything is current on those properties.’ … Staton said with the current financial market, banks are being very protective of their assets and many developers are having trouble acquiring funds.”

The foreclosure notice was not “a mistake”; a deal was struck after the notice had been sent. The issue Staton and the rest refused to address was that a developer with whom the city was planning to invest $40 million in bonds had defaulted on a City Center II mortgage.

On August 13, 2009, a Huntington foreclosure notice was published again, this time, as required by the foreclosure process, weekly through September 10, with a sheriff’s sale set for September 17.

On September 4, the Lansing State Journal reported that Strathmore was “working to reach an agreement with lender Huntington National Bank to avoid the sheriff's sale…. [Strathmore’s President said he was] awaiting word on a $28 million bank loan that would be guaranteed by the U.S. Department of Housing and Urban Development, but has the remaining financing in place from nonbank sources. He said he plans to meet with the city sometime soon to present a financial plan
and gain City Council approval.”

On September 17, 2009, LSJ reported: “The developer of City Center II said he's reached an agreement with the bank to suspend a sheriff's sale of foreclosed properties. Key properties…had been scheduled for auction today. But Strathmore Development Co. has an agreement with lender Huntington National Bank to
restructure its debt…. ‘We still think the project can move forward in the fourth quarter.’ … The property owners, listed as City Center Two Project LLC and CADA Investment Group LLC, owed about $148,870 in delinquent 2008 property taxes to Ingham County as of Wednesday. They also owed $129,090 in 2009 property taxes to the city, which were due Aug. 31.”

The Huntington foreclosure PR disaster having been averted, the mortgage was forgotten, and the focus became the delinquent taxes, until those were finally paid and the CC II extension approved by City Council.

As to the HUD loan guarantee, on April 6, 2010, The State News reported it had been told by the developer that Strathmore had "applied for a loan guarantee from the U.S. Department of Housing and Urban Development, but ...deadlines have passed without word as the federal agency sorts through mounds of applications." Freedom of Information Act requests to HUD have proven that, although the city expended money and considerable prestige on pursuing a HUD loan guarantee, including soliciting support letters from Senators, Congressman, and Governor, Strathmore never submitted an application nor did any prospective lenders. The federal government does not let deadlines pass with no word, lenders not developers apply to HUD, and HUD has rules against loan guarantees for a developer with a track record of foreclosures, unpaid taxes, and contractor liens. The claim, during the most recent reemergence of City Center II, that pursuit of the HUD loan guarantee had been dropped because it takes too much time was pure spin.

Mezzanine Financing and Mountain Vista Real Estate Opportunity Fund

A distressed mortgage does not simply vanish.

The restructured Huntington mortgage note is not available among Ingham Country Register of Deeds documents (mortgage amounts are, but often the terms of the notes, such as rate of interest and maturity date, are not). However, the restructuring can be inferred from the subsequent amended mortgage, which refers to: “that certain Mezzanine Loan Agreement, dated as of September 8, [2009?]” (the year is given as 2008, but 2009 is what makes sense, and the document was prepared by Strathmore, which is notoriously sloppy with paperwork).

According to Investopedia, “Mezzanine financing is basically debt capital that gives the lender the right to convert to an ownership or equity interest in the company if the loan is not paid back in time and in full.” Mezzanine loans carry high interest rates—11% seems to be the low end, with the high end 30%. Developers with little true equity investment for a project will sometimes call mezzanine financing, “equity,” although in fact, it is a very high interest loan that only converts to equity if it isn’t paid back. In that case, it allows the financier to take control of the project’s limited liability company.

Regardless of the details of the September 2009 mortgage restructuring, Huntington National Bank quickly dispensed of the mortgage. Dated January 25, 2010, “Huntington assigned all of its right, title and interest in the Original Mortgage, to Mountain Vista Real Estate Opportunity Fund.”

Although organized as a Delaware limited liability company on October 9, 2007, Mountain Vista Real Estate Opportunity Fund I, LLC, operates out of the Cleveland area, with its Ohio registration as a “foreign” (i.e., Delaware) company doing business in Ohio dated March 13, 2008. Its two managing directors formerly were “long time senior executives in the Commercial Real Estate Division of National City Corporation.”

National City, of which East Lansing Mayor, Vic Loomis, was a “senior vice president and senior lender,” was once a venerable old bank, founded on May 17, 1845 as City Bank of Cleveland. After growing to the seventh largest bank in the United States, it was one of the financial institutions hardest hit by the collapse of the bubble, having aggressively pursued high risk real estate lending, and on October 24, 2008, it was acquired by PNC, with the help of the U.S. Treasury, for $5.2 billion in stock, a small fraction of what it had been worth a few months earlier.

Loomis’ October 21, 2008, “I am not an investment banker” speech at Council notwithstanding, it was National City commercial bankers like him who made almost $150 million in loans to Strathmore development projects that ended in foreclosure.

The Mountain Vista Mortgage

According to its (undated) announcement: “Mountain Vista Real Estate Opportunity Fund I, LLC provided a $12,500,000 mezzanine financing for the development of a mixed use project in East Lansing, Michigan. The project totals 648,559 SF and aggregate capital investments of $122 million (includes non-owned portion of the project). The mezzanine loan was structured in coordination with various public and private financing sources.”

The amended mortgage to Mountain Vista of January 25, 2010 lists Strathmore’s president and his wife as guarantors (meaning they must pay for the debt personally if the LLC can’t—developers are sometimes forced into personal bankruptcy because of such guarantees).

The amended mortgage mentions three dollar amounts: “that Amended and Restated Mezzanine Promissory Note…in the original principal amount of $8,925,000.00.… Amended and Rested Promissory Note…having an original principal amount of…$3,575,000.00…. that certain Guaranty, executed …on or about May 19, 2008, pursuant to which said Guarantors guaranteed the payment of the obligations of Center of Bonita Partners, LLC…and Tamiami Investment Properties, LLC…arising with respect to a certain Mezzanine Loan Agreement and related Mezzanine Promissory Note…in the original principal amount of…$10,875,000.00.”

On July 28, 2009, Mountain Vista Real Estate Opportunities Fund had filed suit for Breach of Contract in Ohio Northern District Court against Center of Bonita Partners, LLC and Tamiami Investment Properties, LLC, and against Strathmore’s President and his wife as guarantors, asking for $10.875 million. The extra $10,875,000 attached to the City Center II mortgage was settlement of this secondary debt on the failed Center of Bonita shopping center renovation near Fort Myers, Florida, National City having foreclosed on $38 million in mortgage debt in March 2009. The Breach of Contract suit was voluntarily dismissed on February 9, 2010, shortly after the mezzanine financing mortgage assignment on the City Center II properties was signed.

The first two amounts, the $3,575,000 for the original principal from the Huntington mortgage (presumably paid to Huntington for the mortgage assignment), plus $8,925,000 in new money adds up to the $12.5 million in the announcement from Mountain Vista. There is some evidence this $12.5 million was already in the works as part of an earlier City Center II financing package, but was used to substitute for the Huntington mortgage when that ran into trouble.

Various long–delayed expenditures by Strathmore affiliates soon after January 25, 2010, plus the failure to pay 2010 taxes on the properties secured by the mortgage until May 2011, demand an answer to the question of how much, if any, of this extra money for City Center II is sitting in an account somewhere waiting to be spent on construction (there is nothing in the mortgage requiring this).

A document obtained from the city through FOIA that might have provided some answers was redacted.