A bankruptcy judge has signed off on a plan to prevent an electricity shutoff at the Leland House apartments in downtown Detroit and allow the remaining 75 or so residents to stay.
U.S bankruptcy Judge Maria Oxholm on Thursday, Dec. 4, approved the plan, which authorizes the owners of the rundown 22-story building to take out a $1.2 million short-term, high-interest-rate loan that is to be paid off if and when the building is sold next spring.
Some of the loan proceeds must go toward an immediate $57,120 payment to DTE Energy before a court-ordered deadline of 5 p.m. on Monday, Dec. 8. Other proceeds must go to buying casualty insurance for Leland House, which is something the building hasn’t had since 2014 and that would protect the property’s creditors if something catastrophic were to happen.
Originally known as Leland Hotel, the Leland House offers some of the cheapest rents in downtown and a significant number of its residents are older and have lived there for years.
On Friday, Nov. 28, the residents were given a surprise notice by management to vacate their apartments in five days due to a then-pending DTE service shutoff.
Now, with the new deal in place, the residents are being told they can stay.
“We are not looking to evict or lose any tenants right now,” said Ryan Heilman, an attorney representing the limited partnership company that owns Leland House. That company filed for filed for Chapter 11 bankruptcy on Nov. 3.
He and other Leland House representatives told the judge Thursday that they would like for the residents to remain in the building at least until the sale process concludes, which could be in late March or early April.
However, the emergency payment to DTE must go through by the Monday deadline for their overall plan to go forward.
Even so, Judge Oxholm told the several Leland House residents who attended Thursday’s court session that her advice would be to continue looking for a new home.
“Things keep happening hour to hour,” the judge said. “So really, if you have another option available to you now, I would take it.”
Next Bridge Funding is providing the $1.2 million loan, which has a six-month term and a 17.99% interest rate, according to bankruptcy court documents. The loan is to be repaid as soon as the building is sold.
Real estate investor Ara Darakjian has an option to buy the building, but is waiting for the bankruptcy case to sort out and hasn’t yet executed the option, a representative said. Court documents show that Darakjian is currently under a management contract for the building with about three years still remaining.
Luis Ramirez, a representative for Leland House who appeared in court, told the Free Press that there currently are no buyers in mind for the building.
Leland House’s emergency loan was nearly held up by a last-minute report concerning the physical condition of electrical equipment in the building. The report spooked the lender, as the cost of repairing the equipment could be high.
But once DTE’s attorney made a phone call during a break in the court session, it was learned that the potential problem would only arise if electric service were to be cut to the building. So Next Bridge ultimately decided to go forward with the loan.
The judge approved the plan over an objection from Detroit-based Kraemer Design Group, whose lawyer says the firm is still owed $387,502 for architecture and design work it did for a planned $125 million rehab of the building that never happened.
The design group didn’t like the idea of its creditor claim going behind that of Next Bridge, the lender for the new loan.
Anthony Howard, 66, was among the Leland House residents who attended Thursday’s court session.
He said he has been dealing with complications from radiation therapy from prostate cancer, and had just returned home on Nov. 28 when he received the five-day notice from building management to move out. Howard said he has lived in Leland House for over a decade.
While he managed to put some of his belongings into a storage unit, he wasn’t able to get everything out in the short period of time that he and fellow tenants were given — prior to the recent reprieve.
“What is so insensitive about it all is how it was handled,” he said.
Another resident, Ann Smith, said she has been living at at Leland House since 2015 and would like to stay. She moved to Leland House from the nearby Town Apartments, after it was purchased by a new owner and existing tenants like herself had to leave while the building underwent renovations and rebranded as Town Residences.
“This is my second gentrification experience being downtown,” Smith said.
Leland House is also the subject of a blight and nuisance abatement lawsuit from the city that is pending in Wayne County Circuit Court. The city recently asked the judge to appoint a receiver.
Along with the residents, the building is home to the nightclub Leland City Club, known for underground music and goth nights. A GoFundMe to “save” the nightclub had raised over $24,000 as of Thursday.
Bankruptcy documents show Leland Houses’ gross annual revenue from rents and parking fell from $1.1 million in 2023 to $439,370 in 2024, and was $424,475 for the first 10 months of this year.
At the time of the bankruptcy filing, the building’s owner reported owing a $388,291 bill for unpaid property taxes, plus over $19 million in claims for various creditors, including:
- The Detroit Downtown Development Authority ($1 million)
- City of Detroit ($325,100)
- Detroit’s Water and Sewerage Department ($128,872)
- Capital Impact Partners ($1.5 million)
- Invest Detroit (amount unknown)
- The Michael Higgins Trust ($924,046)
- Murray Schlussel of Berkeley, California ($5 million)
- Robert Reilly of France ($5 million)
- Kraemer Design Group ($387,502)
Contact JC Reindl: 313-378-5460 or jcreindl@freepress.com. Follow him on X @jcreind