Heartside Building On The Auction Block

June 5, 2002
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GRAND RAPIDS — A Kent County Circuit Court order has put the Watson & Heald Building on the market. The city of Grand Rapids will sell the 116-year-old structure at 101 South Division to the highest bidder on July 18.

The city won a foreclosure case in Circuit Court and took possession of the building from Terry Vanderschuur, a California resident, and Breezewood Properties LLC, a Kentwood company.

After the owners failed to make promised improvements to the three-story building, the city filed a demolition-by-neglect case against them. Then the city made the repairs and billed Vanderschuur and Breezewood Properties for the improvements. The city has the first lien on the building.

The court order allowed the city to take ownership of the building after it learned that the owners wouldn’t be reimbursing the city for its repair cost of $144,920. And the court ruled that Fryling Construction Co. is also owed $86,785 for the work the firm did on the building while under contract to Breezewood Properties.

The city will hold a public auction at the east door of the Hall of Justice, 333 Monroe NW, at 10 a.m. on Wednesday, July 18. Deputy Sheriff Barry Lott will conduct the auction, which doesn’t require interested parties to pre-register.

The upset price, or minimum bid, is $231,705, the amount owed to the city and Fryling Construction, plus any interest allowed by the Court. The sale will be held open for an hour, and the winning bidder will have to make payment in full after the sixty minutes expire. A letter of credit will not be considered as legal payment.

Also, Breezewood Properties has a 90-day redemption period, meaning it has three months to reimburse the winning bidder in full if it wants to repossess the building.

“The creditors — which is us and Fryling — we can adjourn the sale if we’re not getting a bid that we like,” said Assistant City Attorney Bernard Schaefer.

“Or we can bid in,” he added. “Because we have a judgment for an amount, we’re in a first position, and we could bid in for our amount, or even less and take ownership.”

Fryling Construction could also do the same. But before the contractor could assume ownership, it would have to repay the city what it spent on repairs, a total nearly twice what Fryling is owed.

“The buyer gets a shell, a shell in a historic area. The buyer can redevelop it in the manner that they choose so long as the exterior is treated with the care that meets the requirements of the Historic Preservation Commission,” said Schaefer. “So a buyer could go all residential, all commercial, or mixed use.”

The Watson & Heald, at the corner of Division Avenue and Oakes Street, is situated in the historic Heartside neighborhood. Whoever renovates the building would be eligible to collect tax credits equal to a percentage of the investment made.

An open house to tour the building will be held on July 11 at 1:30 p.m. An information packet is available by calling 616-456-4569.

The money the city spent on repairs came from its Urban Development Fund. The city secured its expense by placing a first-priority lien on the building. The demolition-by-neglect ordinance allowed the city to step in, make the repairs, and recoup its investment either through repayment from the owners or from the sale of the building.

Breezewood Properties bought the Watson & Heald from Vanderschuur a few years ago, and then announced that it would build loft apartments on the upper floors and lease retail space on the lower level.

The city filed its suit while Vanderschuur still owned the building, but held off from taking any action in order to give Breezewood Properties a chance to make the required repairs. The company started work on the building, but wasn’t able to finish the project.

“We would have liked nothing better than to have seen Breezewood succeed. But after a while, it became clear that wasn’t going to happen. Then we moved our suit forward and went to judgment,” said Schaefer.

“Then Fryling caught up with us in the court case to get its judgment affirming the arbitrator’s award from the contract.”

For most of its existence, the Watson & Heald was home to a hotel and a boarding house on the second and third floors, while service businesses occupied the ground floor. The lawsuit was initiated by a ruling from the city’s Historic Preservation Commission when the board ruled that the exterior of the structure was being neglected.

In addition to the exterior work, structural repairs were made to the building.

“We replaced a portion of the roof that fell in. We re-roofed that area and actually installed a roof membrane over the entire roof, boarded over the skylights and installed structural supports for the outside wall where the roof and floors had fallen in,” said Schaefer.

“So we’ve basically saved the building by shoring up the structure and we’ve put it in the ‘dry’ by the roof and related repairs,” he added. “And that was our goal. So now the shell is preserved for developers.”

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