Failing to sell at auction, the future of Ypsi’s Smith Furniture Building uncertain


As it was billed as a “no minimum bid” auction, I would have expected Ypsilanti’s long-neglected Smith Furniture building to be sold to the highest bidder this afternoon, regardless of how low that bid might have been. Apparently, though, that wasn’t the case. The highest bid, placed by Ann Arbor developer Phil Conlin, was rejected by the building’s owner, James Pate. Based on the report by reporter Tom Perkins, it would seem Pate wouldn’t have accepted anything less than $100,000, or twice what was bid by Conlin. According to the auctioneer, Jerry Helmer, who was interviewed by Perkins, $100,000 was what Pate would nave needed to pay the $60,000 he owes in back taxes and cover the costs associated with the auction. So, until such time that the County initiates foreclosure proceedings, it looks as though we’re stuck with Pate, who, as we’ve discussed before, has repeatedly proven himself to be an impediment to development.

Over the 21 years Pate has owned the building, he’s rebuffed several credible suitors, always insisting that the building was worth considerably more than they were willing to pay. And, all the while, the empty building continued to decay. (Let this be a lesson to any of you would-be land speculators out there.)

Conlin, from what I’ve heard, was given an opportunity to bid higher, but refused… Which brings me to what I’d like to talk about today.

First, by way of background, here’s a clip from the story.

…After the auction, Conlin said he considered the Smith building because of some of its attractive selling points.

“There’s a lot of square footage for the price,” he said. “It’s in a good downtown location and it’s fairly well built.”

Conlin said he was surprised no one bid higher than him, though he didn’t want to bid more because of what he called Pate’s relationship with the city.

“Mostly, there’s a lot of hostility between the city and property owner, and it takes a lot of city cooperation to put together a quality development,” he said. “That’s not there, so it’s a little scary.”

“I’m not an Ypsi guy,” he added….

Two things. First, what do you think Conlin meant when he said, “I’m not an Ypsi guy”? And, second, how would Pate’s relationship with the City, regardless of how bad it may be, impact Conlin’s development of the property, assuming that he were to buy it outright from Pate?

Am I reading Conlin’s comment incorrectly, or does it sound as though he’s saying that he, as the new owner, wouldn’t have been able to develop the building because of what’s transpired over the past 21 years between Pate and the City? And, if that is what he’s saying, how do we address that? I mean, my perception is that the City would bend over backwards to make something positive happen with this building, and it really surprises me to hear someone say that, in his opinion, the City would allow their displeasure with Pate to impact the development of the property, even after the former owner is out of the picture. Something about that just doesn’t make sense to me. But I wasn’t at the auction, and I don’t know how things went down. Judging solely from his “I’m not an Ypsi guy” comment, though, I’m wondering if maybe he just freaked out after spending an afternoon here, to the point where he thought, “You know, I really don’t want to be any part of this.” And, if that’s the case, I think we need to take a long, hard look in the mirror and think about how we portray ourselves to outside investors.

I hope I’m reading this wrong… Please tell me if I am… That, “I’m not an Ypsi guy” comment, though, just really concerns me. Again, I may be reading too much into it, but what it says to me is, “Y’alls crazy.”

update: I just learned that Pate apparently made a million dollars on the sale of a property 14 years ago. Apparently he owned a parcel along Michigan Avenue that was purchased by the City when putting together the colossal boondoggle we now know as the Water Street Redevelopment Project. So, one would think, Mr. Pate likely has the money to pay his back taxes… All the more reason to be angry with him over all of this.

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  1. Anon
    Posted September 11, 2013 at 11:28 pm | Permalink

    Judge Donald Shelton told Popiolek…

    …He was the only one charged in the case and could have faced up to 10 years in prison for the arson charges … Instead, Popiolek was allowed to serve probation only… Developer Stewart Beal … recommended Shelton not sentence Popiolek to prison, but instead require him to complete several hours of community service.

    We live in a great, forgiving town, where an owner [Beal] of a very significant (for all of us) property had suffered “the most psychologically and emotionally damaging experience of [his] life,” and then recommends several hours of community service for the man who burnt his building down.

    Despite living in Saline, Judge Shelton is very much an Ypsi guy, having been a EMU regent and then lobbied for the role of EMU presidente.

    In a town where the guy who burned down the Thompson Block gets recommended to “several hours of community service…”

    Let’s, please, look in the mirror.

  2. james
    Posted September 11, 2013 at 11:50 pm | Permalink

    You’re thinking of a ‘no reserve’ auction. A ‘no minimum bid’ just means that someone could have started the bidding at $1.

    That said it’s annoying for Pate to have an auction w/ no minimum bid if the lowest he was willing to accept is $100k.

  3. Robert
    Posted September 12, 2013 at 7:48 am | Permalink

    I am willing to offer Pate 10 percent of profits from the Puppet Mark Maynard Museum.

  4. Eel
    Posted September 12, 2013 at 8:08 am | Permalink

    Pate has a plan. Within a few years, the mold and bacteria that he’s been cultivating will have eaten away the entire structure, leaving him with a nice, empty lot to build on.

  5. Demosthenes
    Posted September 12, 2013 at 8:24 am | Permalink

    I received the following yesterday after the auction. I trust the source, who said it was originally from Steve Pierce, though they could have misrepresented. From these comments, I have to wonder if Steve was the source of Conlin’s concern that the city is not just going to enforce its ordinances against Pate’s 20-year-vacant mold-farm, but harbors some sort of irrational aggression against any owner of this property.

    High bid on Smith Furniture was $50,000 today with just two bids. Auctioneer says the deal won’t close. So what does this mean?

    Currently, the owner owes about $80,000 in back taxes. On Sept 13, he will owe another $24,000 in taxes. Auctioneer still needs to be paid so minimum price right now would be about $115,000 if someone wanted to buy it.

    So if anyone out there has $115,000 and wants a good deal on the building, call the auctioneer, you can buy the building for $115,000 today.

    It will still take about $500,000 to make the space usable as an empty shell with a roof that doesn’t leak, heat and electricity. Then you have to pay for the buildout dependent on the tenant.

    The city will continue with their vacant building fees and inspections of about $1500 a year plus likely continue to pursue the owner in court. Won’t cost the current owner anything he just ignores the city, but the City will continue to expend money and time on the building.

    If no buyer comes forward in the next 4 to 6 weeks, my guess is the owner will let it go to foreclosure, the County will then auction it next year (2014) with a minimum bid of $110,000 to pay the tax bill. All the while the building will sit empty and continue to deteriorate.

    My next prediction is the building will probably not sell at the first County Tax auction, so about 6 months to one year later in 2015, the County will then auction the building for no minimum and it will likely sell. But that is nearly two years away.

    Even when it does sell, in 2013 or 2015, the new owner is still stuck with a tax bill of over $2,000 a month, no usable building and a city that will be unrelenting in their legal efforts along the vacant and dangerous buildings ordinance pursuing the new owner. Few owners are willing to deal with that which I the reason I think there was no action today.

    Not to mention, there is no parking, the new owner is entirely dependent on the City for parking, With the city eliminating nearly 40% of the parking in that lot several years ago, that is a huge risk for the new owner and prospective tenants.

    I suggested to the city to offer the same deal on the taxes the City did on the Starkweather House a couple of years ago where the city reduced the taxes by over 75%. Sadly the city wasn’t interested in such a assistance to the new owner.

    With the annual property taxes and fees from the city of over $25,000 per year, it is easy to see why the auction today wasn’t successful and why no one was willing to pay more than $50,000 for a 26,000 square foot building.

  6. anonymous
    Posted September 12, 2013 at 8:54 am | Permalink

    Can someone explain to me how this works? Assuming he has money in the bank, is there no recourse? Can’t we get the back taxes from him?

  7. Edward
    Posted September 12, 2013 at 9:12 am | Permalink

    Is the auctioneer on the hook for the clean up that was done prior to the auction, or did Pape pay for that?

  8. Posted September 12, 2013 at 9:12 am | Permalink

    @anonymous: If you do not pay your property taxes for 2.5 years, the County takes the property in question and auctions it off to recoup the unpaid taxes — it’s basically similar to you not paying your mortgage, and the bank taking your property and selling it to cover the debt. If the property does not sell at tax auction for a high enough price to cover the debt, the taxing entities (city, county, library, etc) eat the loss; they can’t go after other assets to cover the debt, only the property in question. This calculation is usually done in aggregate across all the tax auctions within a jurisdiction — if some go for higher than the starting bid (the balance of taxes and fees owed), that can cover a few properties that go for less than what is owed.

    I believe the city has avoided “chargebacks” of property tax debt the past few years, in large part because of the pre-auction open house that lets bidders walk through the properties, allowing higher bids on the properties in good condition. (To my knowledge, Ypsi is the only jurisdiction in the state that has put together this open house deal with their county treasurer — the norm is that bidders have zero access to the property before the auction, so have to bid cautiously, not knowing whether a house has an interior in pristine condition or has been stripped and has tons of water damage.)

    Now, usually most of the properties in the auction are vacant lots or houses or small commercial buildings, with tax-and-interest debts in the $10k-$25k range; a $100k+ debt on Smith Furniture means much more potential for under-bidding. The City has zero ability to reduce or forgive any of this debt except by paying it themselves.

  9. XXX
    Posted September 12, 2013 at 9:15 am | Permalink

    Can someone from the city respond to Conlin’s quote: “Mostly, there’s a lot of hostility between the city and property owner, and it takes a lot of city cooperation to put together a quality development. That’s not there, so it’s a little scary.”

    Why does he think that he wouldn’t have city cooperation?

  10. Mr. X
    Posted September 12, 2013 at 10:11 am | Permalink

    OK, let’s see if I have this straight.

    1. There’s no way to go after Pate for back taxes. All we can do is take the building, which, in the past, Pate has kept from happening by paying the absolute minimum, essentially keeping things perpetually at the “I’m not quite two and a half years behind” point.

    2. I suppose he could try to list it again with a real estate agent, but if he were to sell it now, he’d either have to sell it for over $115,000, in order to cover what he owes, or make up for the difference himself, which seems unlikely.

    3. Given all of this, it looks as though he’s made up his mind to walk away from the building altogether and leave it to the local authorities.

    4. When it goes into foreclosure, there will be another auction, all the proceeds of which would go to the county. The minimum bid will be set at $115,000, in order to satisfy the debt. It will likely not sell.

    5. There will then be a second auction, with no minimum bid. Whomever gets the building in that auction will own it free and clear. In other words, the buyer won’t have to worry about any of the tax liability from before, even if the building sells for considerably less than what is owed. Any money received from the sale will go to the county.

    6. The new owner will, however, have to start paying over $25,000 per year in taxes and fees, and the clock will start running with the purchase. Unless, of course, the city determines that it’s in their best interest to lower the taxes in order to stimulate development.

    7. So, about a year from now, it’s conceivable that someone could purchase the building for something between $1 and $100,000. Until then, it will continue to rot, and there’s absolutely nothing that can be done to speed the process.

  11. anonymous
    Posted September 12, 2013 at 10:52 am | Permalink

    Thank you, Murph.

  12. Posted September 12, 2013 at 1:23 pm | Permalink

    I didn’t live in the city at the time so I can’t be sure, but based on everything I know, *boondoggle* is the wrong word to describe what happened. No one responsible and pushing this was cheating/lying/stealing and making money on the situation. Correct me if I’m wrong.

    I think it’s best to describe it as an amateurish fuck up.

  13. anonymous
    Posted September 12, 2013 at 1:48 pm | Permalink

    “Boondoggle” doesn’t imply cheating/lying/stealing, does it?

  14. anonymous
    Posted September 12, 2013 at 1:49 pm | Permalink

    I looked it up.

    “work or activity that is wasteful or pointless but gives the appearance of having value”

  15. josh
    Posted September 12, 2013 at 2:30 pm | Permalink

    My impression is that Conlin was the only serious bidder there. If the quoted message from Pierce is to be believed, there is a perfectly reasonable explanation. At an auction it is only smart to talk down the property you are competing for. Conlin is in a room with a real “Ypsi guy” who not only talks it down, but puts in a lowball bid. If you have the least amount of information in the room, it only makes sense to reassess the risk involved.

    It probably would have been a really good deal for Conlin at 100k, but with only one other lowball bidder who has better information, he has every reason to doubt that. I think this clusterfuck lies squarely with Pate and maybe the auction house for not getting enough bidders. I am sure Pierce isnt any happier about the building down the street from his house rotting for another two years any more than we are.

  16. 734
    Posted September 12, 2013 at 3:06 pm | Permalink

    That makes sense. Conlin freaked because he thought that there would be real bidding, there wasn’t, and he started to think “maybe I’m missing something”. It probably also crossed his mind that, if he wanted the building, he might be able to get it even cheaper in foreclosure, if he just waited for a while. If the only other person who bid was Pierce, and he wouldn’t go any higher than $5k, then Conlin could save himself a bundle, unless other people come to the table.

  17. 734
    Posted September 12, 2013 at 3:10 pm | Permalink

    Why weren’t there more bidders? Is the building in that bad a shape, or is it that Ypsi is still seen as a risky investment?

  18. josh
    Posted September 12, 2013 at 6:22 pm | Permalink

    Hopefully the news coverage with a definite price tag of $100k finds a buyer. Fortunately Pate still needs to pay the auction house so he has some motivation to move it sooner rather than later.

  19. josh
    Posted September 12, 2013 at 6:25 pm | Permalink

    Pate still owns 10 N Adams (behind Wolverine) too. That also seems to be sitting and molding. Why is Ypsi cursed with some of the worst landlords?

  20. Posted November 6, 2013 at 9:07 pm | Permalink

    The scanner at the library just sent me the following. Not sure why.


  21. Posted November 6, 2013 at 9:08 pm | Permalink

    I like that I’m the only one who can post photos in comments… At least I think that I am.

  22. site admin
    Posted August 13, 2014 at 12:23 pm | Permalink

    It sold at auction yesterday for approximately $99,000. There’s no word as yet to got it, or what their plans are.

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