Modern Ruin

Bloomfield Park promised to be the next Birmingham, but the $2 billion project was abandoned in mid-construction due to the 2008 global economic meltdown — at least that’s the popular version of what transpired. Here is the untold story.

For tens of thousands of motorists who every day drive past the failed Bloomfield Park development on Telegraph Road, the abandoned 80-acre site, just north of Square Lake Road, must seem like a massive 21st century version of Detroit’s signature ruin, the devastated and abandoned Michigan Central Station.

The unfinished shells of 14 modern buildings and accompanying construction debris — three multistory parking decks, clusters of windowless six-story structures, rusting steel beams, piles of gravel, and fields of scraggly weeds — appear frozen in time.

Behind the concrete, marble, and steel silhouettes is another overgrown area that was to be Pavilion Park, a public square featuring bridges over two small lakes, hiking and biking trails, manicured gardens, and fountains. Potential residents were being asked to pay up to $2 million for a spacious condominium.

Craig Schubiner, the developer, spent more than a decade acquiring the site in Bloomfield Township that straddled the border with Pontiac, yet he had never previously developed such an expansive real estate project. While in the 1970s, the land was home to a drive-in movie theater, Schubiner’s proposed $2 billion development was billed as the second-coming of the region’s most desirable urban district.

“Bloomfield Park will resemble downtown Birmingham in that we’ll have exciting restaurants and stores at street level, with offices and residences above. We’ll have around 1,200 residences that will be priced from $290,000 to $2 million,” Schubiner told The Detroit News in 2004, two years before the construction started.

A 250-room luxury hotel; upscale homes; fashion stores such as Ann Taylor, Banana Republic, and Victoria’s Secret; a Barnes & Noble; as many as 10 restaurants; a gourmet market; a sporting goods store; and a 14-screen movie theater were to be part of the eclectic mix.

To make his dream come true, Schubiner hired New York-based retail expert Mitchell Friedel, whose track record for leasing prestigious projects at the time included the AOL Time Warner Center in New York and CityPlace in Florida.

The project architect was another national heavyweight, Elkus/Manfredi Architects Ltd. of Boston, designers of Downtown Disney in Anaheim, Calif., and the Peninsula Chicago Hotel and retail development on Michigan Avenue in Chicago. “We’re looking to get the stores open in late 2008,” Schubiner said back then, and predicted the project would be built in multiple phases over 10 years.

The first phase would have 533,000 square feet of retail space, 127,000 square feet of offices, and 60 condominiums. In August 2006, Schubiner sold the project to developers Diversified Realty (DDR) of Beachwood, Ohio, a real estate investment trust that trades on the New York Stock Exchange, and another national blue chip real estate investment manager, New York-based Coventry Real Estate Advisors. Schubiner stayed on as a consultant. At that time, DDR was the owner, developer, and manager of 720 properties in 45 states, as well as Puerto Rico, Brazil, Russia, and Canada.

With an all-star lineup of experience and access to cash, Bloomfield Park took off in late 2006 like a shooting star. Almost overnight, the $350 million first phase sprouted upward in a frenzy of activity. Construction crews swarmed the property and, every day, lines of heavy-duty trucks rolled in and out of the site. Traffic on Telegraph Road was disrupted for months for utility upgrades.

But it all crashed in November 2008. After sinking $200 million into the project, the developers failed to process some 40 retail leases that Schubiner had signed up, and after two years, those efforts were swallowed up in the global financial meltdown. The construction loans they counted on to complete the project vanished. Soon after, Schubiner’s Bloomfield Park dream turned into a legal nightmare as some 60 lawyers filed 175 liens and lawsuits on behalf of more than 100 vendors seeking $25 million in unpaid bills.

After two years of legal wrangling in Oakland County Circuit Court, mortgage holder Wells Fargo settled the last of the claims in July for $4 million. The collapse of Bloomfield Park was also a factor in the dissolution of the development partnership.

In November 2009, Coventry filed a $500 million lawsuit against DDR in New York alleging fraud, malfeasance, mismanagement, violation of fiduciary and contractual obligations, and self-dealing in 12 major real estate projects across the country for which the two companies were investors. The joint venture portfolio included Bloomfield Park. Coventry lost the case in the lower court last year and, in May, an appellate court tossed out the appeal.

Schubiner, meanwhile, has initiated two lawsuits in Oakland County Circuit Court, one for $50 million, the other for $1.2 million, against Coventry and DDR. He blames them for the failure of the project and loss of the payout he would have received on completion of Bloomfield Park.

That’s not to say he walked away empty-handed. Financial statements filed in Oakland County Circuit Court show that in the two years before the project expired, Schubiner earned development fees totaling nearly $1.3 million from Coventry and DDR. Due to the pending lawsuits, Schubiner declined an interview for this story.

Alan Greene, a Bloomfield Hills lawyer representing Wells Fargo, says the bank has been focusing on clearing up the claims and that no decision has been made on what to do with the vacant property.

Observers and participants in the project pin its failure on the global financial collapse. Others believe there were municipal obstacles, which stemmed from a deep dislike of Schubiner by several Bloomfield Township officials, that eventually ruined the project. “We are very concerned whether Mr. Schubiner would be successful with this project as proposed,” said Bloomfield Township clerk Wilma Cotten, in late 2001. “We are concerned it would not be successful, and it would be a complete failure that will be catastrophic to the community.”

Throughout the development phase, Schubiner pointed out to the media that township officials purposely slow-walked the project through zoning and approval procedures, and used legal proceedings to slow the effort down at a cost of hundreds of thousands of dollars of taxpayer money. Former township supervisor David Payne, who succeeded Fred Korzon, another critic of the project, rejected the notion that the municipality had it in for Schubiner.

“We believe it failed because there was no market for the development they proposed,” Payne says. “Sure the litigation delayed development, but a lot of the delay in the development, I believe, also stands with the developer (Schubiner) in getting plans submitted timely.”

Payne, who retired in August, says Schubiner never presented the township with a market study to show whether the project was feasible, despite repeated requests. “We engaged in our own (housing) market study to basically test the viability of the project,” he says. “We did our market study independently. Our study said in no way was that a viable project, given the mix of uses … they were proposing.

“Our market study called for more residential; it was the office space that was the issue,” he continues. “It was also too dense for that site. I don’t think it had anything to do with the time frame. It was just a flawed project.”

However, a person familiar with the project says Schubiner did submit multiple market studies, along with traffic impact reports, environmental surveys, and numerous other municipal requirements. In addition, the Township’s housing study was done to lend support for its plan to move jurisdiction of part of the Bloomfield Park project, but the effort failed.

Payne says Bloomfield Park might have been successful elsewhere. “You can have a great vision, but the question is: Does that vision work in the setting where you are proposing it and is it an economically viable project? We never felt it was, in that location.”

Of course, achieving success is much easier when the developer has the blessing and cooperation of the government entity in which the project is to be located. From day one, Schubiner and his Harbor Cos. development firm, which was located across Telegraph from the site of Bloomfield Park, had no such relationship with Bloomfield Township.

His original proposal in 1999 was well past existing zoning ordinances and height restrictions in that area of the township. At the time, the ordinance limited buildings to 32 feet, or about two stories. His plan called for six office buildings varying in size from 15 to 20 stories, plus a 250-room four-star hotel.

Although Payne now says he was always against the project, neither he nor other officials attacked it with the zeal of Cotton, the former township clerk. She saw it as a catastrophe in the making and tried to stop it.

With the township refusing to bend its zoning regulations, Schubiner took another tack. He asked the city of Pontiac to annex the property, which abutted the township boundary on the east side of the site.

That move, which Payne says took the township by surprise, touched off an expensive 16-month legal battle. Schubiner and the township spent more than $500,000 on legal fees, according to articles that appeared in The Detroit News. The newspaper also said that tens of thousands more was spent on fiscal reports, traffic impact studies, meetings with planning officials and other public bodies, public hearings, and initiating ballot proposals for the eventual annexation vote in September 2001.

The annexation issue was a divisive one, automatically casting the township as the well-heeled area denying its poor neighbor its best chance for collecting hefty tax revenue. The takeover also led to another mini-scandal, in which Cotton and the Michigan State Police alleged that employees of Schubiner’s Harbor Cos. gave free rent to township residents, some of whom the State Police said were recruited to move into the target area, register to vote, and vote “yes” for the annexation into Pontiac.

All of Pontiac’s 44,000-plus registered voters were eligible to take part in the election and the annexation passed there, 5,879-1,086. However, only 40 of Bloomfield Township’s 32,000-plus registered voters — those living in 20 homes on two streets in the targeted area — were allowed to cast ballots, as stipulated by state law. The annexation passed on a vote of 14-8, as only 22 residents voted.

The Detroit Free Press obtained a copy of the State Police’s investigation, in which six residents who voted “yes” said they received free rent or waivers of late rent fees from Harbor employees in exchange for their affirmative votes.

The State Police turned their investigation over to then-Michigan Attorney General Michael Cox, who declined to prosecute anyone. With that, Cotton’s intent to set aside the election results and kill the project also went awry, clearing the way for Bloomfield Park to survive.

“I’ve never seen anything like this, not in this town, not in the 32 years I’ve been around,” says Tony Ferlito, president of Ferlito Construction in Roseville, who had no role in Bloomfield Park.

To counteract the annexation, and restore up to $60 million in potential taxes over a 12-year period to its coffers, township officials partnered with the city of Birmingham in a so-called 425 Agreement in the summer of 2001. Under state law, communities can transfer property to their jurisdiction by sharing their resources and services for an economic development project.

In a curious move, the two communities set up their development zone to include 50 acres of Schubiner’s land, all of which was commercial property. In turn, the two communities extended their development zone across Telegraph to include Carl’s Golfland, a 14-acre business owned by Carl Rose. Rose’s house was also included in the development zone.

Township officials said they included Carl Rose’s home and business because it would have likely been sold at some point. “If Carl’s Golfland no longer exists, it would be susceptible to development,” said Bill Hampton, the Township’s attorney.

By attempting to claim planning jurisdiction over most of Schubiner’s proposed project, in addition to Rose’s property, the two communities hoped to limit the scope of Bloomfield Park and set the stage for less dense residential and retail offerings.

“The detachment procedure is absurd, and it’s another instance of the Township improperly using state laws to slow us down and make us spend thousands of dollars to protect our development rights in court,” said Tina Bassett, spokeswoman for Harbor Cos., in late 2001.

Rose declined to talk about the 425 Agreement between Birmingham and Bloomfield Township. He also didn’t want to discuss signing a petition on Nov. 28, 2000 in favor of Bloomfield Park as Schubiner originally proposed it.

With the annexation, the city of Pontiac committed $68 million in future taxes to pay for roads, utilities, and infrastructure, while agreeing to share some future tax revenue from the development with Bloomfield Township. Although the land was now part of Pontiac, the U.S. Post Office allowed Pontiac and Bloomfield Township to apply the more prestigious address of Bloomfield Hills to the development.

As the future fate of the property awaits a decision by Wells Fargo, Jim Bieri, a national retail expert and president and CEO of Stokas Bieri Real Estate in downtown Detroit, says Bloomfield Park’s failure was not wholly due to hot political opposition in which the project launched.

“You could talk to some naysayers who would say that project was doomed from the start because the concept was flawed,” he says. “But on the other hand, Schubiner did not do what you see there now. Coventry and DDR took over the deal from Schubiner, paid off his debt, redesigned the project, and went forward with it. They are pretty sophisticated, and they believed there was something there for them.”

The fervor that Coventry and DDR had for the development also helped sink the project, Bieri says. “They went at it full-steam, they had all those buildings under construction at the same time, and they were doing well. Then the economy collapsed and they couldn’t get any construction financing,” he says.

Schubiner earlier said he should have seen the animosity brewing while assembling the land. “When I first started acquiring property for the project (in 1993), I got a terse note from Wilma Cotton stating that I needed to talk to the township before I bought any more land. There’s no law in Michigan that requires me to do that.”

The letter states: “As I (Cotton) have suggested to you (Schubiner) previously in telephone conservations, prior to amassing these properties you should submit your conceptual development plans to the Township for our comments.

“There are certain residents who do not wish to sell their homes and they do not wish to hear from you further. Should these homeowners change their minds in the future, they have your telephone number.” db