Thursday, October 30, 2014

Detroit Capitalists Involved in Scheme to Use Federal Funds to Remove African American Population
Demonstration against bankruptcy on Oct. 23, 2013.
JC Reindl
Detroit Free Press 9:06 p.m. EDT October 29, 2014

Detroit developer Herb Strather made Wednesday's deadline for a down payment on his winning $3 million bid for thousands of blighted and foreclosed city properties, but his grand $2 billion vision for redevelopment may have hit a snag.

Strather and his partner in the blight-buying venture, Texas-based Eco Solutions, placed a $3,183,500 bid for over 6,000 of what he calls "Detroit's worst properties." The properties, spread throughout the city, were packaged together in the Wayne County Treasurer's tax-foreclosure auction to help speed their cleanup and reuse.

The bundle is believed to be the biggest collection of blighted properties assembled for sale in Detroit history.

An early Detroit casino investor whose development projects have a mixed record, Strather sees his redevelopment effort as a chance at redemption for both himself and Detroit's still-ailing neighborhoods, which have largely missed out on the revitalization occurring in and around downtown.

Strather made a 4:30 p.m. Wednesday deadline for initiating a 10% payment on his bid, said Wayne County Chief Deputy Treasurer David Szymanski. The $315,000 wire transfer is expected to clear by Thursday morning.

The 6,365 properties that Strather and his partner are buying consist of about 1,000 vacant lots, 1,000 houses in disrepair, and 4,000 abandoned and burnt-out structures whose owners stopped paying taxes, he said.

In an interview, Strather said his goal is to redevelop the properties in tandem with Detroit nonprofits and community groups — a costly undertaking.

"It would take about $2 billion to finish it all," Strather told the Free Press. "Two billion in five years. We'll do it."

His goal is to bring investment and momentum to Detroit's neighborhoods, similar to that now happening in the city's downtown and Midtown.

Strather's full payment for the blight package is due within 14 days. He is also required to either demolish all of the structures within six months, or submit a redevelopment plan for approval by Wayne County Treasurer Raymond Wojtowicz.

The Treasurer's office said it would begin talks with Strather regarding that plan once the down payment money was received.

"This is going to be a massive undertaking, so it's not as simple as saying 'this is what I want to do,'" Szymanski said.

Yet a key component of Strather's plan — millions in federal demolition funds via the Detroit Land Bank Authority — may have hit a roadblock.

Strather said he hoped to reach a separate redevelopment deal with the land bank authority, which could bring federal money for demolishing the thousands of blighted structures.

But a representative for the Land Bank said the law precludes the type of partnership Strather envisions.

At an estimated cost of about $10,000 per house, the total demolition bill for such a project could run in the tens of millions of dollars.

"Federal law only allows us to use demolition funds on properties for which the land bank owns titles, not for the benefit of a private developer," said land bank spokesman Craig Fahle. "So if Mr. Strather is expecting the land bank to pay to demolish properties that he is purchasing, then he has misunderstood the law."

Strather was not available for a response to the land bank's statement. But a representative said he plans to complete the blight package purchase and carry out his plan.

"Whenever Plan A doesn't work, there is always a Plan B," said Strather's spokeswoman Princess-Odilia. "Mr. Strather has a history of doing very very successful developments. Trust and believe, he has a Plan B."

Strather is chairman of the Detroit-based Strather & Associates real estate investment firm and runs Strather Academy, a real estate training school for adults.

His partner in the blight redevelopment, Eco Solutions, holds contracts for managing Housing and Urban Development properties throughout Michigan, he said, "So they were the natural person to link up with."

Strather was an early investor in MotorCity Casino and involved in the Woodbridge Estates development in Detroit, on the site of the former Jeffries Homes housing projects. Strather also led a group that lost the Hotel St. Regis in Detroit's New Center to receivership following a loan default.

During an interview Wednesday in his office at Tower Center mall at Grand River and Greenfield Avenue, Strather drew a connection between the economic situation Detroit has endured and his own finances in past years. Now, he and the city are ready for a comeback.

"We have taken such a hard hit," Strather said, "and no one has taken a harder hit than me. I went from $70 million to negative $20 million. (But) I'm not negative anymore."

The IRS and state of Michigan have filed liens totaling $227,530 against Strather since 2009, according to Wayne County Register of Deeds records. As well, Comerica Bank obtained a $77,229 judgement against him earlier this year, the records show.

"There were tax liens, foreclosures, just like anybody else," Strather said. "Herb Strather, he's taken a hit, but he's demonstrating to the community that he can come back."

Free Press Staff Writer Jennifer Dixon contributed to this report.

Contact JC Reindl: 313-222-6631 or jcreindl@freepress.com. Follow him on Twitter @JCReindl.

Wayne County Auction Nets $66 million in bids

This year's Wayne County Treasurer's tax-foreclosure auctions netted $66 million in bids from the sale of 17,196 properties. There were $43 million in bids in the October auction and $23 million in September, according to Treasurer Raymond Wojtowicz.

Not all bids result in payment.

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