Ilitches back out of $1.5M deal to buy homeless shelter building in Detroit's Midtown

Detroit — The owners of Little Caesars pizza chain have backed out of its promise to buy a Midtown building that houses a homeless crisis center, forcing the nonprofit to change plans on how it will build a larger facility on the east side, according to two sources familiar with the deal. 

It's the latest change in development plans by the Ilitch organization for the area near Little Caesars Arena, the sports/entertainment facility that's home ice to the Ilitch-owned Detroit Red Wings. The IIitch group has drawn recent media and neighborhood criticism for its delays on various residential and commercial projects around the arena. 

The latest change involves a homeless crisis center called the Neighborhood Service Organization's Tumaini Center on Third Street, near the corner of Martin Luther King Jr. Boulevard. It's one of the last down-and-out streets in the Midtown/Cass Corridor neighborhood. For decades, the street has been the gathering point for scores of people who congregated around the center and the surrounding empty lots.

A few blocks away, new condominiums recently have sold in the $650,000 range, an example of the billions in private investment that has taken root.

For more than one year, the nonprofit Neighborhood Service Organization, NSO, and Olympia Development of Michigan, the real estate arm of the Ilitch family's host of businesses, had a verbal agreement about the Tumaini Center at 3430 Third Street. The agreement was that Olympia Development would buy the building for $1.5 million. Both sides confirmed the potential deal in September 2017. 

The building sale was a key part in the nonprofit's funding plan to build a new center on Mack Avenue, just east of Gratiot. Late last year, the Ilitches began to waffle on the deal. Earlier this year, Olympia Development officially backed out, said Linda Little, NSO president and CEO.

"I certainly have no issue with the Ilitch organization," Little said on Wednesday. "I want to emphasize that we are moving forward with our plans to build a new facility." 

A spokesman for the Ilitch's Olympia Development did not respond to requests for comment on Wednesday.

A groundbreaking is planned next month to build the residential part of the facility on Mack Avenue, Little said.

But plans to close the Tumaini Center and build a new facility that offers the same services at the Mack Avenue site have been delayed because of the Ilitch's last-minute reversal, according to two sources familiar with the deal. The sources requested anonymity because they are not authorized to publicly talk about the plan.

 The nonprofit plans to build the non-housing part of the new facility after it sells the current Tumaini Center, the sources said. The NSO still plans to close the Tumaini Center's Third Avenue location, Little said. She declined to comment in detail about the impact of the Ilitch decision. 

"We have multiple offers to sell the buillding," Little said. The group hopes to finalize a sale of the building soon, she said. 

The Tumani is the only 24-hour walk-in center in Detroit. It serves more than 1,000 people each year and accepts them under almost any conditions, including those battling substance abuse or mental illness issues that would cause shelters to turn them away. The clients can stay as long as they like, though there are no beds, only chairs in the small center.

There are showers, a nurse on standby, emergency food, counseling services for housing and other needs. The center allows clients to access some storage and receive mail there.

It’s one of the reasons the block outside the NSO center is a gathering point for many — they have no place else to go.

The Tumaini Center is about six blocks northwest of Little Caesars Arena. Entities linked to Olympia Development began to buy some of the empty lots around the Tumaini Center three years ago. The total sale price for the lots adds up to $1.4 million, public records show. The city of Detroit also owns nearby lots on Third, Fourth and Peterboro.

It's rare that a corporate donor backs out of a long-standing agreement, even a verbal agreement, to a charity group, said Michael Montgomery. He's a fundraising consultant and an adjunct professor at the University of Michigan-Dearborn, teaching fundraising and grant writing. He is owner and principal of Montgomery Consulting Inc.

"it would be disruptive for any nonprofit to deal with," Montgomery said. The Ilitch group may have viewed the verbal agreement more as a "real estate deal" than giving to a charity, he said. 

"In the world of charity fundraising, this is not a nice thing to do," Montgomery said. "This sounds like it's a more complex situation. It's a real estate development deal. Real estate development operates more by the rule of the jungle. Backing out of deals happen all the time."

laguilar@detroitnews.com

Twitter: @LouisAguilar_DN