Detroit property auction winner has outstanding liens

Christine MacDonald
The Detroit News
  • Herb Strather owes at least $260,000 in state and federal tax liens and judgments from 2007 to 2011.
  • The developer also has a $77,000 judgment against him filed in Wayne County Circuit Court.
  • Strather and his partners bid $3,183,500 for 6,350 mostly dilapidated and vacant Detroit properties.
  • The bid was contingent on a 10 percent deposit due today and full payment within 14 days.

Detroit — A businessman who won an auction of tax-foreclosed, blighted properties in Detroit has a string of tax debts himself.

Onetime casino investor Herb Strather met a deadline Wednesday for a down payment of 10 percent of the $3,183,500 he bid to buy 6,350 dilapidated properties. The lands — mostly vacant lots but also salvageable homes — were packaged in an online sale meant to discourage speculators and tax deadbeats.

Strather has at least $300,000 in recent tax liens and court judgments, but said his company, Detroit Bundle LLC, has the means to renovate salvageable properties and demolish dangerous ones.

"Our partners have plenty of money," said Strather, a developer of the Woodbridge Estates housing development that replaced the Jeffries housing project. He also was an owner of the Hotel St. Regis that went into receivership in 2009.

"We have very substantial partners. I am willing to lead the way in the redevelopment in the 'D.' "

Strather has two weeks to pay the balance to acquire 2,000 vacant lots, 3,000 properties that need to be razed and 1,000 salvageable homes.

Wayne County officials worked with Detroit Mayor Mike Duggan to package the land in a "blight bundle." The properties would have gone to the Detroit Land Bank to be razed or resold if no one bid on them.

Riet Schumack, a Brightmoor resident, said she worries that if the bundle is sold to a private developer whose plans fall through, the neighborhoods will suffer.

"We are going to stay in limbo," said Schumack, whose neighbors had hoped to acquire the vacant lots they've been maintaining as gardens and small parks. "I hope the county is going to deeply look into this man's finances."

As a condition of the sale, county officials required bidders to get approval for a redevelopment plan, including proof of finances. Chief Deputy Treasurer David Szymanski said he plans to meet with Strather on Thursday about his plans.

During an often emotional press conference early Wednesday, Strather said he wants to work with community groups, churches and the Detroit Land Bank to demolish dangerous buildings, build homes and rebuild dilapidated ones. He teared up speaking of his hopes for rebuilding the city and said Detroiters should take the lead in its redevelopment.

"We can save our community," Strather said. "It's not too late. We have the chance to arrest the decay and rebuild."

Strather said his main partner is John Page, who owns Eco-Solutions. Strather said the company has contracts with the U.S. Department of Housing and Urban Development to manage government properties in several states, including Michigan. Page did not attend the Wednesday press conference and didn't return a call for comment.

Strather said he hasn't established a timeline for his proposal and acknowledged the redevelopment may take more than six months. He said he hopes the Detroit Land Bank will agree to use federal money to demolish some of the homes and plans to meet with its officials soon.

Land bank officials on Wednesday said they are waiting for the outcome of Strather's talks with the county treasurer to finalize the purchase. A land bank official cautioned that federal funds can't be used to demolish privately owned properties.

"If Mr. Strather is expecting the land bank to pay to demolish properties he has purchased, he has misunderstood the law," said spokesman Craig Fahle.

Speaking to reporters Wednesday, Strather spoke generally about his tax debt and acknowledged that he owed nearly $20 million several years ago.

"I am just like the city of Detroit," Strather said during the press conference at his building, Tower Center Mall in Detroit, a shopping center at Grand River and Greenfield. "I have taken my financial hits."

Strather runs his own real estate school called Strather Academy. He said he is one of the most experienced developers in Detroit and is best equipped to revitalize the problem properties.

But Wayne State Law School professor John Mogk said any developer who has a record of not "meeting obligations needs to be looked at carefully. You don't want to have the blight continue.".

Strather is the registered agent of a company, Apollo Two, that has lost four Detroit properties this year to tax foreclosure; another 85 are at risk for foreclosure next year. Strather said those properties are owned by his real estate students and many of them are on payment plans with the treasurer.

Strather owes at least $300,000 in state and federal IRS tax liens from 2007-11 and more recent court judgments, according to records filed with the Wayne County Register of Deeds.

Strather has a $77,000 judgment filed against him this year in Wayne County Circuit Court by Comerica Bank for a defaulted loan.

"As far as I am concerned they are small," Strather said of the tax debt and judgments, which he said he plans to pay.

Court records show Strather also owes $24,000 for unpaid rent and fees for a Riverfront Towers apartment that he lived in until 2010 and $25,000 to a Detroit pastor who alleges he wasn't paid for a failed investment.

Strather and his businesses have been sued in federal court over failed projects and other deals at least five times since 2000, records show. The suits have all been settled.

Meanwhile Wednesday, county treasurer officials announced they sold 17,196 foreclosed properties at their September and October auctions for a total of $66 million. That slightly above last year's proceeds of $61 million on the sales of 10,745 properties.

Staff Writer Joel Kurth contributed.