Michigan’s federal bankruptcy court has approved a sale of the beleaguered Leland Hotel in downtown Detroit, but some of the proceeds have to be used to compensate former tenants forced out last year by a power failure, a judge said.
Judge Maria Oxholm in the bankruptcy court for the Eastern District of Michigan approved the sale of the former luxury hotel on Bagley Street for $3 million on June 1 to the Mudhish Development Company. Some of the proceeds will be used to pay off a nearly $65,000 bill to Detroit’s water and sewerage department.
Some will also go to pay off a $1.2 million short-term loan made by Next Bridge Funding, part of which was intended to pay more than $57,000 demanded by DTE to cover a portion of unpaid power bills, before an involuntary power loss in December.
“The company is satisfied with the court’s sale order, and we’re looking forward to having a closing on the sale,” said Ryan Heilman, the attorney for the Leland House Limited Partnership Company.
Future plans for the Leland, which dates back to 1927 and was listed on the National Register of Historic Places in 2005, aren’t clear. Raad Goba with Mudhith Development Company couldn’t be reached for comment.
And because the sale terminates the leaseholding interests of former tenants, the few dozen residents who were still living at the Leland before December’s power outage forced them out are entitled to compensation for the remaining value of their leases, the judge ruled. Thirty-seven residents were displaced, according to an earlier filing in the bankruptcy case.
Oxholm ordered the Detroit Tenants Union, which previously advocated for residents to be allowed to move back in, to file a motion by June requesting the amount and type of compensation.
“The Court has determined that the Tenants are entitled to adequate protection in the form of compensation for the value of the remainder of their leasehold interests, that compensation is the only option available because the Property is uninhabitable, and that the Sale Proceeds shall be held until the amount of such adequate protection, and the administrative expenses, have been determined,” Oxholm wrote.
The Leland House Limited Partnership Company filed for bankruptcy in November while saddled with nearly $19 million in debt. The Mudhish Development Company was picked in April as a “stalking horse” bidder for $3 million, which essentially means the entity sets a bid “floor.” Mudhish remained as the only bidder after an auction held April 27-29.
The president of the Leland House, Luis Ramirez, took over for former owner Mike Higgins after his death in 2023.
An objection to the sale by the Detroit Tenants Union, which sought protection of the former residents’ lease interests, briefly delayed the court’s approval of the sale to Mudhish.
The Detroit Tenants Union couldn’t immediately be reached for comment on Monday, nor could the member of Mudhish Development Company listed in the court filings, Raad Gobah.
The remaining residents had to vacate the building in a hurry last December when a power failure led Detroit’s fire marshal to declare the building uninhabitable. The Leland was already on borrowed time since the beginning of that month, when DTE demanded the building pay a deposit of more than $57,000 to cover a portion of unpaid power bills or face a shutoff.
The former posh, 22-story hotel has been used as apartments for years. The four-star hotel with 720 rooms had air conditioning when it opened, a luxury at the time.
But even before December’s power outage, issues plagued the building. A November 2022 city inspection found standing water in the basement, only one working elevator and a lack of heat in common areas. It will be the responsibility of the new owner to bring the building up to code, according to the sale order.
It’s also been steeped in sometimes seedy lore over its nearly 100-year history: Allegedly mob-entangled union boss Jimmy Hoffa spent so much time at the long-shuttered fourth-floor Hideaway Bar that the FBI came knocking to question several Teamsters living at the hotel when Hoffa disappeared in 1975.
The Leland also was the home of City Club, a City Club, a nightclub known as an iconic gathering spot for the city’s goth and punk subcultures.
jcardi@detroitnews.com
This article originally appeared on The Detroit News: Downtown Leland Hotel approved for sale by bankruptcy court
Reporting by Julia Cardi, The Detroit News / The Detroit News
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By Julia Cardi, The Detroit News | USA TODAY Network
