Bing firm's loan extended

Luxury condo project funds must be repaid to Economic Development Corp. in Nov. 2010

David Josar / The Detroit News

Detroit -- A company created by Mayor Dave Bing to build a now-stalled luxury condo project along the Detroit River is inching closer to defaulting on a $698,893 loan from the city's Economic Development Corp.
The bridge loan to Spingarn Development LLC, which was to be used until better financing was found, was due Sept. 22, according to an audit the group submitted to the state treasurer's office in September.
Other Spingarn investors include DTE president Anthony Earley, auto tycoon Roger Penske and former professional basketball player Derrick Coleman, according to a press release for the project.
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A spokesman for the Detroit Economic Growth Corp., which provides professional staff to the EDC, said the date to repay the no-interest loan was pushed back to Nov. 22, 2010, when the board altered the development agreement to give Spingarn more time to get needed funding to start construction.
"The extension of terms to Spingarn is not unique," DEGC spokesman Bob Rossbach said in a statement. "The EDC and the Downtown Development Authority have been responding to the continuing economic situation by extending loan terms to a number of businesses that are generating economic activity or contributing to the long-term economic health of the city."
Rossbach said the developers "had already spent more than $3 million in architectural and other work related to the marketing and construction of the project."
The mayor and other investors have refused to comment on the status of the project or on any plans to repay the loan.
On May 5, Bing put his shares of the project in a blind trust that is managed by two members of his transition team, attorney M. Patrick Dreisig and accountant John M. Sirhal.
"Mayor Bing is hopeful the project will move forward without his involvement," his spokesman Dan Lijana said in an e-mail.
One investor, Tyrone Davenport, chief financial officer of the Charles H. Wright Museum of African American History, said he still had a stake in the project but refused to answer questions and then hung up to take another call.
Earley and Penske did not return phone calls.
Announced in May 2007, Spingarn was to build a $60 million condo complex with 98 units on Atwater between St. Aubin and Chene that were to sell for between $700,000 and $1.4 million each.
The development needed to have two-thirds of the units presold to secure the rest of their financing, but less than half that amount were presold.
For at least the past year, a prefabricated office, which once held full-scale models of some units, has sat locked and unused. Exterior flags are tattered and trash is scattered over the site.
Bing's team was hand-picked by former Mayor Kwame Kilpatrick's staff. The city was to provide clear title to the land and make other improvements to pave the way for construction.
Chances now are slim for the project to get off the ground, said Cary Scott Belovicz, a partner in the Birmingham office of Hendricks & Partners, a real estate development firm.
"Where are you going to get lending in today's market to finance the development and then where are you going to find comparables for the people who want to borrow money to move in?" he asked.
Then there is the price point.
"People can go to the suburbs for that price," Belovicz said. "For $400,000, you can buy in the suburbs what used to be $800,000, and in the suburbs you won't have the taxes you have in the city."
It is not unusual for loans made by the Economic Development Corp. not to be repaid.
According to the same audit the EDC provided the state, of the $6.6 million in outstanding loans as of June 30, 2009, the EDC expects to be repaid just $1.3 million.
"We are not in this to make money," Rossbach said. "The value is in creating a situation that is beneficial to new businesses."
Other EDC loans that have failed to be repaid have been made to the shuttered Sweet Georgia Brown, Seldom Blues and most recently to Coleman, who was sued by the group earlier this month over $200,000 it gave him to build a retail strip mall.
Last year, the organization sued Lawrence and Raymond Joseph after they borrowed $170,000 to open a fast-food chicken restaurant on East Jefferson. In less than a year, they filed for bankruptcy and never repaid the loan. The EDC won the case and is still trying to get paid, according to court records.