Friday, April 10, 2020

Why an eBay auction became an election focus

October 31, 2019
<p>Candidates sit on the panel at the East Lansing City Council Candidate Forum on Oct. 3, 2019.</p>

Candidates sit on the panel at the East Lansing City Council Candidate Forum on Oct. 3, 2019.

Photo by Matt Schmucker | The State News

Some East Lansing City Council candidates have decried the sale of a city-owned property on eBay — but why? 

After being vacant for almost 16 years, the land on Merritt Road will be transformed after a dispensary project was approved in August. 

Some prospective bidders were left out of the deal, said candidate Lisa Babcock.

"We will never know what price the city would have received for the property if it had been fairly auctioned, but common sense says a price increase of nearly $7 million shows the city got a raw deal," Babcock said via email.

The incumbent candidates defended the deal. 

Mayor Pro Tem Erik Altmann said in August that turning the sale into a political football does a disservice to the taxpayer benefits of the deal.

“All I can say is that I know why I voted to accept the offer and the reason I did that is because the property had been for sale for 17 years,” Mayor Mark Meadows said after a city council debate. “At one point we thought we had it sold in 2004, that fell through.”

It is unclear if the new owner would make a profit from this sale, given the plans for the property include a new hotel, a medical marijuana dispensary and a retail center. This $13 million investment includes removing old buildings and rubble piles that the city left. 

The site has been empty since The Department of Public Works & Environmental Services relocated in 2004. 

After only a few weeks of owning the property, the new developer Jeff Yatooma, a cannabis industry player, listed it for eight times the price they paid through at least two separate brokers. 

Because the site has been vacant since 2004, there haven’t been tax payments in years. Some city officials call the project a win either way since the property has been tax exempt for so long. 

The city has been trying to sell this property for many years, even before the Department of Works left. However, they had been unsuccessful.

The city sold part of the property in 2011 for $350,000 to Spartan Technology LLC. This company has redeveloped that section into a chemical manufacturer called Working Bugs and later constructed a distillery known as Red Cedar Spirits. 

In 2016 the city accepted an offer for the remainder of the property for $850,000, however, the deal fell through after a request for $3 million to help with environmental remediation. The city declined this request.  

“In 2011 somebody bought part of the property, 10 acres of the property for the distillery,” Meadows said. “Two years before this sale we had had an offer of $850,000 except that they had this condition about environmental assessment and when that came in it showed $3 million dollars in clean up costs at that location and we were not willing to give that for the property.”

The property began attracting more buyers last year when East Lansing adopted zoning overlays that allows medical marijuana provisioning centers. 

The city then offered the property purchase rights on eBay, which concerned many citizens and drew heavy criticism. 

"Secrecy is only part of the problem. The other issue is that the city failed to determine the real value of the property, which resulted in putting the land for up for auction for a lowball price," Babcock said via email.

Yatooma won the eBay auction on behalf of Kodiak Landarc with a bid of $1,000,900 and agreed to take responsibility for environmental remediation. 

However the property may be sold again. After owning the property for several weeks, Yatooma listed the property at a 700% markup. 

The property was originally listed by a national broker, CannaMLS, but is now listed on the broker’s own site. When it was first listed, the property was $12 million but is now listed for $7.99 million. 

This price includes the yet-to-be-built dispensary, and two other buildings that have not yet been constructed. Plans submitted to the city council show a $13 million investment from developers to build the dispensary, a 9,000 square-foot strip mall and a four story, 107-room hotel. 

Developers have not yet submitted any changes to the plan or a divide request for the 6.42-acre lot since the site plan was approved by the city council in August. 

“I thought was a reasonable offer for us to expect even though I don't necessarily like the process that was followed, the way the auction was conducted,” Meadows said. “Not that we had an auction, we had been advised that it was probably a good idea to put it up for auction, without a press release or opportunity for others to be notified of it.”

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