Lender foreclosing on Ann Arbor's Ashley Terrace high rise; $20 million owed
Ann Arbor News file photo
An $18 million loan that financed Ann Arbor's largest downtown redevelopment is in default, according to a foreclosure filing, with the lender seeking a total of $20.1 million from developers Joseph Freed & Associates.
The loan for Ashley Terrace dates from 2005, when Chicago-based Freed finalized plans to build the 10-story high-rise consisting of 99 condos, 71 of which are excluded from the foreclosure.
It also has 10,000 square feet of street-level retail space - which remains unleased - and 16,500 square feet of second-floor offices, including a Flagstar Banking Center.
The location is the corner of West Huron and North Ashley streets.
Freed and several other developers aggressively pursued downtown Ann Arbor redevelopment opportunities over several years. The company also operates 411 Lofts, a student high-rise that opened in the fall at the corner of South Division and East Washington streets
Among Freed's other projects in Ann Arbor were the Arborland redevelopment in the late 1990s and Glen Ann Place, a long-delayed and still-unbuilt mixed-use project near the western edge of the University of Michigan's medical campus.
Downtown activists were concerned as Ashley Terrace and other projects were proposed for the central business district, with forces advocating higher density, mixed-use buildings clashing with others who said the market for downtown housing was limited.
Ed Shaffran was among those who cautioned against overbuilding. He said this afternoon that the Ashley Terrace foreclosure appears to signal what he warned against: New construction downtown could only be built at a price that would effectively price a typical unit out of the range of most buyers.
Today, active listings at Ashley Terrace include a two-bedroom condo at $355,000 - or about $285 per square foot. A one-bedroom model for $274,500 is $297 per square foot.
In comparison, homes in that price range in the city are on the market for under $225 per square foot, and a buyer could choose new construction with an Ann Arbor address for under $150 per foot.
"The pricing was high," Shaffran said. "Extremely high."
Much of the cost covered the cost of construction, Shaffran said, which likely left the developers little room to negotiate a deal.
Ashley Terrace's condos were among the estimated 2,000 new housing units downtown that were in some stage of proposal from various developers in mid-2004.
Among those projects were Liberty Lofts, a redevelopment by the Morningside Group of Chicago; The Gallery, which is unbuilt and in litigation between the lender and developer Mike Concannon; and a partnership between the city and Village Green to build a high-rise with public parking at First and Washington.
Developers disagreed over the market demand for downtown condos, too. Shaffran, who developed several loft-style condos as well as The Armory on East Ann Street, estimated the demand at 200.
Chris Grant, vice president at First Martin Co., agreed.
"We were always under the belief that there isn’t a downtown condo market," Grant said.
Successes have been niche units that have been converted, like the Armory, Grant said.
"But it costs an awful lot of money to do a 100-unit or 120-unit development, especially when you do it all at once."
Unclear is what the foreclosure means to residents.
The likely next step is for a receiver to be appointed to run the building operations. Next, Shaffran predicted, the lender will seek a new owner. And as the price falls for a new buyer, there may be the potential for the 28 remaining units to come onto the market at lower prices than other units sold for.
"Someone's going to take a bath," Shaffran said. "Most likely, it's the financial institution."
The loan is held by Special Services Asset Management Co., which is registered in Illinois. That company acquired the loan on April 19, according to the legal filing, and it appears to be connected to Bank of America. The loan previously had been held by Bank of America, and it originated with LaSalle Bank.
Officials at Freed declined to comment, said Jane Thompson, communications consultant to the company.
"We have not been served with any court papers yet, so we have no comment at this time," she said.