The six-year odyssey to develop Bloomfield Park has taken another twist with developer Craig Schubiner seeking $450 million in damages from a lender that has filed a notice of foreclosure against the property.
Hedge fund Boylston Investment Fund MMV L.L.C. plans to sell its mortgage April 11, claiming BP Associates L.L.C. is in default on terms of a $35 million predevelopment loan. BP is the entity formed by Schubiner to develop the 80-acre site at Square Lake and Telegraph roads.
Schubiner says loan payments are current and not an issue in the foreclosure. He said he still expects to break ground on the $494 million first phase this summer.
Under the terms of the loan, Boylston made an initial advance and then held the rest of the money, sending monthly draws averaging $500,000, Schubiner said. In exchange, Schubiner provided detailed monthly reports providing information on the project's progress.
The main issue in the dispute, he told Crain's Friday, is that he opened a sales center for Bloomfield Park on a nearby property not covered by the mortgage. Shortly before a November visit, Boylston representatives asked for a lease assignment on the property, which Schubiner said he was willing to offer in exchange for timely payment of future draws.
Schubiner's lawsuit said the last check from Boylston came in September.
Schubiner, along with BP Associates and 1939 Associates L.L.C., the entity that owns the sales center, filed the lawsuit Dec. 30 in Superior Court in Suffolk County, Mass., seeking a court order to stop foreclosure and $450 million in damages. The suit contains eight claims related to breach of contract and unfair and deceptive practices. It also claims to have been hurt when Boylston stopped allowing BP Associates to draw on the loan in September.
G. Douglas Lanois, CFO and portfolio manager at Tremont Realty Capital, the company that formed Boylston and which originated the loan, did not return a phone call by press time Friday.
Ann Taylor-Reed, account executive at New York, N.Y.based The Abernathy Group Inc., the public-relations firm representing Boylston, said Thursday that the foreclosure is moving forward as planned.
Taylor-Reed said the company did not want to comment further. An attorney in the Detroit office of Philadelphiabased Pepper Hamilton L.L.P. is representing Boylston and referred calls to Abernathy.
Schubiner said he doesn't know why Boylston is seeking foreclosure.
"We clearly made the payments," he said. "They're using a manufactured, nonmonetary default. It's unjust."
If sold, developer BP Associates would have a six-month redemption period under state law to pay the amount owed on the original Bernard mortgage, said Dennis Bernard, president of Bernard Financial Group, a Southfield-based commercial mortgage banking firm.
Schubiner said he would be able to secure funding to buy the mortgage within the redemption period and secure a construction loan to proceed with the project.
Bernard said stopped foreclosures such as this end with the lender being the winning bidder. If not redeemed, the property is then resold with hopes that the lender can cut losses, Bernard said.
In this case, the property may be worth more than the loan; Schubiner's lawsuit said it's been appraised at $70 million.
BP Associates began selling residential units for the first phase of the development in November. The company told Crain's that it had sold 25 percent of the units, worth about $20 million, in the first two weeks.
"We maintain our position that we want to see the land developed," said Dan Devine, Bloomfield Township treasurer. "However, given the current state of affairs, we're in a wait-and-see mode."
Bloomfield Township is expected to get a s are o tax revenue from the project.
John Bueno, a former Pontiac City Council member whose term expired Jan. 1 and who is serving on the transition board for newly elected Mayor Clarence Phillips, said the city needs the land developed regardless of the backers.
"We can use every penny we can get," Bueno said. "If this means new developers come in and take over, so be it, as long it gets done."
BP Associates received preliminary approval of the first two buildings of the proposed project last fall.
Plans call for more than 70 retailers along with eight parks, two lakes, an 11-screen movie theater and more than 1,500 homes. Schubiner said 32 retailers have committed so far.
Schubiner first presented plans for Bloomfield Park to Bloomfield Township officials in 2000, though he had been buying land in the area for about six years. Township officials didn't approve the plans, citing size and density among the issues.
On Sept. 11, 2001, the residents of the 20 houses on the property and voters in Pontiac approved annexing the land to Pontiac. The annexation sparked seven lawsuits that were dismissed in November 2002 when all parties involved settled on a plan that called for tax revenue to be shared between Bloomfield Township and Pontiac. The agreement also called for the formation of a three-person committee that has final approval over the project and consists of a representative from Bloomfield Township, Pontiac and an independent third party.
Neil
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