DETROIT-Private developers buying land from the state of Michigan beware: Make sure the transaction is legally closed before you make a deal to sell the land to someone else for more money. Otherwise, the government may refuse to close, even if it has signed a contract.
That's the hard lesson private developer Joseph Nederlander is learning. Nederlander is the private contractor who manages the Michigan State Fairgrounds. In April 2000, he agreed to buy 36 acres of government-owned land adjacent to the fairgrounds for $6.1 million to build a racetrack and four hotels. Then the cities of Detroit, Ferndale, Huntington Woods and Pleasant Ridge filed suit in Wayne County Circuit Court to stop construction of the speedway and amphitheater.
This was enough to make Nederlander give up on the idea and sell the land. Even though the deal with the government hadn't been legally closed, he thought since the state had signed a contract, he could move forward with a deal to sell the property for a hefty $10.5 million to another developer, Bernie Schrott.
Mr. Schrott quickly made his own deal to sell the same parcel-to another government entity. Detroit Public Schools liked the parcel for building a new high school and agreed to buy it for $17 million-nearly three times the amount it would have paid the state for the same property.
All's fair in love, war and commerce, right? Wrong. The state has pulled out of the deal, claiming agreements regarding an easement for extra State Fair parking had not been finalized, which would have been discussed at closing. Nederlander has filed a lawsuit.