07/11/2007

Record-Eagle/Sheri McWhirter
The Petoskey Pointe development in downtown Petoskey.

Work on project halted while financing is sought

By Brian Mcgillivary

bmcgillivary@record-eagle.com

PETOSKEY — Construction is on hold at the sprawling Petoskey Pointe project because developers haven't paid bills totaling more than $2.1 million.

Three construction firms, including general contractor JM Olson Corp., filed liens on 13 parcels owned by project developers, including two parcels the city of Petoskey gave developers for credit toward a slice of a planned parking deck.

Development partners David Jankowski and James Wilson of Farmington Hills-based Lake Street Petoskey Associates also haven't paid any property taxes on the parcels for tax year 2006. They owe more than $33,750 in back taxes, according to Emmet County records.

Construction liens were filed in May, but Steven Braun, president of JM Olson, said the company continued to work until the end of June.

Braun said his company hasn't abandoned the project, but is waiting for Petoskey Pointe developers to obtain financing. They hope to resume in the next few weeks.

Jankowski on Monday said "we actually have our loan now, a gap loan, and we've got everything straightened out.”

Jankowski said the developers will close on the loan soon, but he would not answer additional questions. He did not return additional phone calls on Tuesday.

The $60 million Petoskey Pointe project has similarities with Federated Properties' Traverse City project at 145 W. Front St. Both private developments will be built on publicly funded parking decks and both projects received millions of dollars in state tax credits as contaminated brownfield properties, though little environmental cleanup is to be done at either site.

Downstate developer Michael Uzelac, who represents Federated in its Traverse City project, is Jankowski's cousin, and project documents list him as a partner in the Petoskey development.

Uzelac's role in both Petoskey and Traverse City projects included ushering development plans through the public process. Uzelac refused to publicly state his financial stake in either project.

The proposed seven-story hotel-condo is to take up the entire block at the entrance to Petoskey's downtown Gaslight District on U.S. 31.

But for now, at the height of the tourist season, it's just a big hole in the ground.

"The entrance to town looks like a landfill,” said Petsokey resident and former Mayor Ted Pall.

Pall, a frequent critic of the project, said he's not surprised by Petoskey Pointe's apparent financial problems.

"These guys have never done anything like this before and (the city) took an incredible risk with other people's money,” Pall said. "Knowing the developer's inexperience, I'm very doubtful of this project moving forward.”

Current Mayor Dale Meyer said he knew about the liens, but said he's not concerned.

"Construction liens are filed on a lot of projects because I think they have to be put on file within 90 days,” Meyer said.

Meyer said the development's finances currently have no bearing on the city; nor is he bothered by Lake Street Petoskey Associates' failure to pay property taxes.

"Probably a lot of other people haven't paid, either,” Meyer said. "I'm not going to be concerned until I hear something definite from the developers or the city manager.”

Petoskey City Manager George Korthauer did not return messages left for him over two days.

At a city council meeting in June, Korthauer said the city did not have a plan if the Petoskey Pointe project failed, other than to try to collect $970,000 from the developers for the two city parcels, both now encumbered by construction liens.

In its lien, JM Olson said it has been paid $325,000 for $2.48 million worth of work it has done on a $51 million contract. MDC Contracting of Charlevoix hasn't been paid and is owed $485,726, according to its lien filed with the Emmet County Register of Deeds.

Schnabel Foundation Company of Illinois was paid $254,800 of the $1.2 million it is owed.

"We've heard recently that we are going to get paid in the next couple of weeks,” said Schnabel attorney Paul Jolis. "So we are just sitting tight, keeping our fingers crossed, and hoping we'll get paid.”