ROCKFORD — The owner of prime downtown property along the Rogue River is suing city officials over “unlawful, discriminatory, unreasonable and confiscatory zoning practices” that are allegedly preventing successful developments there.
The case involves restrictions tied to a former city-owned property under an agreement that’s meant to guide future development in the pedestrian-friendly area. At least one real estate attorney calls it an atypical situation that raises questions about whether the deed restrictions on the property — which he called “a little unusual” — are enforceable.
DJT Properties LLC — which is registered to Dan Trierweiler — bought the parcel at 8 E. Bridge St. NE in 2010 for $2.4 million from Promenade of Rockford LLC, which is owned by Andrew Gremel, managing principal of local insurance firm The Gremel Group. Gremel was also a developer and partner in Red’s on the River, a restaurant formerly on the property.
Promenade of Rockford had purchased the property in 2005 from the city, which added use restrictions to the deed and rezoned the property from C-2 to a planned unit development (PUD) as part of the property sale. The city, its Planning Commission and City Council are named in the suit.
“It’s not your typical PUD situation,” said David Caldon, a partner with Varnum LLP’s real estate division who has experience working with municipalities and developers on zoning cases. Caldon reviewed the suit before speaking with MiBiz. “It’s really more about the deed restrictions and if those are enforceable.”
Since Trierweiler’s firm purchased the building, two well-established restaurant groups have operated in the space. However, both relocated shortly after, with at least one citing the property’s restricted uses and inadequate parking.
The property includes the 5,500-square-foot vacant restaurant space on the ground floor, as well as the vacant 1,338 square feet of additional space for another tenant. Flavors on the Promenade ice cream shop operates in a smaller retail space, and four of the 15 spaces on the second floor are currently occupied.
The property was shown 20 times in 2020 that resulted in three offers to lease, but none of the proposed uses were allowed under the city’s “Promenade PUD” tied to the property, the Feb. 25 lawsuit claims.
The lawsuit’s 10 counts include violating the city’s zoning ordinance and the Michigan Zoning Enabling Act; a void and unenforceable PUD; and an unenforceable restrictive covenant. DJT asks the court to declare the PUD unenforceable and to revert the property to its original zoning. The company also seeks “monetary damages for the periods during which the zoning operated as a taking,” along with attorney fees and damages.
In its response, the city claims DJT was “fully aware” of the property restrictions upon purchase. It denies key allegations in the lawsuit, including that the property has been singled out with exclusionary zoning and that city officials have subjectively resisted changes to the property restrictions.
The city also denies that it violated its own zoning ordinance, explaining that “ordinary terms and provisions of the zoning ordinance did not apply” because of the deed restrictions on the property. The city also rejects claims that the restrictions violate state and federal law.
DJT Properties is being represented by Warner Norcorss + Judd LLP, while the city is represented by Plunkett Cooney P.C. Attorneys involved with the case at both firms could not be reached for comment.
‘A little unusual’
Municipalities commonly use deed restrictions to try to get some kind of public benefit for land when they sell it, Caldon explained, and that the municipality wants it developed in a certain way.
The city’s PUD is specific and includes restrictions that only allow first-floor restaurants that are sit-down, serve alcoholic beverages by the glass and prepare most menu items onsite and from scratch using fresh ingredients, according to the lawsuit.
Additionally, the PUD prohibits first-floor retailers from selling tobacco, tattoo or piercing services, pornographic materials, lingerie, secondhand items, and candles and incense as the main retail product. It also prohibits grocery stores, offices, dry cleaners, pharmacies, banks, convenience stores, beauty stores or spas, buffet-style restaurants, adult book stores, and card readers from operating there.
Caldon said the restrictions in the PUD for the restaurant are “a little unusual” in their specificity of what kind of restaurant can operate in the space. While the restrictions may have served a public benefit when put in place, DJT alleges that they have since driven businesses away and blocked out new ones.
Red’s on the River formerly operated in the ground-floor space when the building was purchased by DJT Properties. The restaurant, owned by Redwater Restaurant Group LLC, left in March 2016 and moved to Thousand Oaks Golf Club. The restaurant group at the time cited building constraints and limited parking.
In 2017, Essence Restaurant Group LLC expanded its Green Well restaurant concept to the space before rebranding the restaurant as Rockford Riverside Grille. It then again changed to Riverside Grille Banquets & Events before ultimately deciding to not renew its lease. The space has been vacant since 2018 because of the restrictive PUD, the lawsuit alleges.