A Flint-based developer with a controversial project history has purchased the 167,605 square-foot Cherryland Center on South Airport Road in Traverse City – raising questions about the future of the property.
V. Kumar Vemulapalli, owner of Durga LLC, purchased the shopping mall in an online auction on September 11. Sources familiar with the auction say the winning bid was “close to or above” $3.1 million. The minimum starting bid was $1.25 million.
Vemulapalli, who otherwise declined to comment for this story, tells The Ticker he has hired real estate and marketing consultants to help “develop a plan” for the Cherryland Center, which has been in receivership since 2010 after previous owner Schostak Bros. defaulted on a mortgage to Wells Fargo Bank. The 16-acre mall, the first of its kind in Traverse City when it opened in 1976, is home to anchor tenants Younkers, Big Lots, Sears and Kmart.
While the venture appears to be Vemulapalli's first entrée into the Traverse City market, the owner has an extensive, sometimes troubled development history downstate and elsewhere. In 2010, the city of Flint lost a six-year, $9 million legal battle against Vemulapalli over Genesee Towers, a commercial office building the developer purchased at auction in 1997 for $500,000.
After a number of city-issued citations for code violations at Genesee Towers and the desertion of multiple tenants who cited outdated amenities and decrepit building conditions, the city condemned the building in 2004. Vemulapalli then sued the city, claiming Flint was attempting to seize the property through inverse condemnation.
After a binding arbitration process in 2006, the arbitrator – whom the city later argued exceeded the scope of his authority – awarded Vemulapalli $6 million plus interest, a decision that was upheld by the Michigan Court of Appeals in 2009 (the Michigan Supreme Court declined to hear the case in 2010, effectively ending the matter).
Flint taxpayers bore the brunt of the judgment in Vemulapalli's favor, with a 6.751 mill levied on all taxable households in December 2010 – an average of $133 per homeowner.
Another blighted Flint building owned by Vemulapalli and his wife met its demise in a demolition financed by the city and Flint Township in December 2007. Neighbors complained that the 34,000 square-foot Medical Arts Building, vacant for more than 15 years, had become a popular gathering spot for drug users. Costs for the demolition were $143,000, a portion of which was assessed to the Vemulapallis in property taxes.
“It's just unfortunate we have a couple that won't comply with keeping their buildings up to code, and we have to charge them the cost,” Flint Township Supervisor Doug Carlton said in a 2007 interview about the demolition.
Other investment projects of Vemulapalli's have gone more smoothly. In 2011, the developer purchased a hotel and waterpark in Fitchburg, Mass. at auction for $2.8 million; in spring 2014, that property is set to become New England's first Great Wolf Lodge. Vemulapalli also signed a deal in October to convert another hotel and water park property he owns in Cincinnati into a Radisson resort.
Three West, a Traverse City-based commercial real estate firm, has been the leasing agent for the Cherryland Center. Owner Kevin Endres says his firm “will not be continuing on” as the leasing agent for the property under the new ownership, but declined to elaborate.