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Monday, April 2, 2018

AND THEY WANT TO BUILD 275 APARTMENTS IN EAST BAY TOWNSHIP? Can Jay Barnes, A Grand Rapids Real Estate Developer Who Plead Guilty In 2014 To Embezzling Commercial Rent Payments To Fund An "Extravagant Lifestyle" & And His Partner, Fellow Developer Tom Pohlman (Who Walked Away From Millions In Business Debt He Was Personally Responsible For In A 2013 Bankruptcy) REALLY Build Those Apartments?

“Northern Capital Investments is a Florida-based, full-service commercial real estate development firm. Our Best-in-Class project teams provide development, construction management, acquisition, asset management, and property management services to maximize performance and investment returns.”

Northern Capital Investments, LLC's Tom Pohlman recently brought his dog-and-pony to Grand Traverse County's East Bay Township, along with a request to rezone 27 acres of industrial property to build an apartment complex.

Dubbed “Silo Ridge”, the project is already described on the developer's site as “an approved 260-unit apartment community located in Traverse City, Michigan. The project will consist of eleven three-story buildings, a clubhouse and full amenity package. The community is situated just minutes from downtown and the East Bay.”

But what do we really know about Pohlman, Northern Capital Investments, LLC—and Pohlman's partner John Raymond Barnes.

Not much—until now.

THE TALENTED MR. BARNES 

According to contemporaneous reporting by local Grand Rapids media, Barnes is a former partner in Encore Development, originally created in 2003 by Tom Pohlman as Encore Development, LLC, and was arrested by the Michigan State Police in November 2014. 

State Police Detective Sgt. Rob Davis said the charge stemmed from a 2007 real-estate deal in Ionia County, known as Fountain Plaza Investors, LLC formed by Barnes under the Encore Development Group, LLC umbrella on April 9, 2007. 

Barnes was a managing partner and used rental fees from the commercial property to live an “extravagant lifestyle,” police said. He used proceeds for non-related business and personal expenses, police said. 

Police said the embezzlement was uncovered when the mortgage fell into default, alerting other partners. State police began investigating in 2009. Investors could not obtain financial documents from Barnes and Encore Development, police said. 

Davis said it was a complex case, which required police hire a forensic accountant in 2012. 

Investigators determined that Barnes took nearly $100,000 and failed to report the earnings to the IRS. “This case was particularly complex because the individual, Mr. Barnes, had so many different LLCs, corporations and companies and bank accounts, shuffling money every which way,” Davis said. 

Barnes was sentenced to 42 months probation and ordered to pay $66,000 in restitution for the embezzlement. Later, on March 16, 2016, Michigan's Department of Licensing and Regulatory Affairs permanently revoked his real estate.

Today, Barnes continues to work with Pohlman, now as VP of Development at Northern Capital Investments, which is based in Naples, Florida.
Yes, that's right, snatching fat stacks of Benjamins out of the kitty isn't always grounds for termination. 

As you can see below, Northern Capital Investments, LLC was formed as by Pohlman and Barnes on March 23, 2017 in Florida as a Foreign Limited Liability Company. 

However, although Pohlman formed the original entity here in Michigan on January 30, 2014, the entity's last annual statement was filed on December 21, 2016. The State of Michigan considers Northern Capital Investment's status as “not in good standing”.

And while Barnes was laboring under an embezzlement cloud in 2014, Pohlman had filed personal bankruptcy in late 2013, in the process discharging nearly $7.0 million in claims without payment.

(Scroll down for continuation of this article.)


POHLMAN BANKRUPTCY: 2013 

In early 2011, Tom Pohlman was diagnosed with leukemia, and later underwent chemotherapy and a subsequent stem cell transplant.

On September 12, 2013, Pohlman filed Chapter 7 bankruptcy, also called "liquidation" or "straight bankruptcy," the process by which a debtor's assets are sold, creditors receive payment, and the debtor is then free from those debts.

Although medical bills are a common driver of bankruptcy, Pohlman's bankruptcy filing listed less than $160,000 in debt specifically identified as medical.

However, Pohlman identified nearly $7.6 million in business debt.

Among those debts was a $90,000 loan related to Encore North, LLC, an entity Pohlman formed in Michigan on February 25, 2003; a $5,000,000 business loan Pohlman obtained from Fifth Third Bank and a $250,000 business loan relating to the Greenwood Investment Group. 

Greenwood was formed in Michigan on December 28, 2009 by David B. Ederer.

Pohlman, Ederer and Barnes were all involved in at least one notable project that went sideways in Mt. Pleasant: the Union Commons retail complex on Bluegrass Road in Union Township in Isabella County. 

Ederer, an Encore principal and the firm's general counsel, boasted during construction in 2006, "It will be the gateway to Mt. Pleasant."

Not so much.

According to a Stipulated Judgment and Order Of Sale filed on December 1, 2009 in Isabella County's 21st Circuit Court, the “entire unpaid balance of the (Union Commons) mortgage debt has been accelerated and is due and payable, and as of October 1, 2009, the total interest, and late charges, pursuant to the Notice referenced herein will be $3,409,497.14. The total included the $3,125,000 principal balance, $284,197.14 interest, and a $300.00 late charge, with interest accruing at a contractual rate of 11.595%.”

The excerpt below reveals each partner's debt: Barnes, Pohlman and Ederer were each personally liable for $828,545.00 (Freeland Encore, LLC, a division of Saginaw's Wirt-Rivette Group, was dissolved on February 10, 2011.) 

Pohlman's income statement, excerpted below from his 2013 bankruptcy filing, is perplexing. 

Although Pohlman and Barnes were busy proclaiming the success of Encore to Grand Rapids media, doubling its staff and buying its own building (300 Ionia Avenue SW in Grand Rapids) for $1,050,000, Pohlman shows -$54,000 as income for 2010.

And even though Pohlman began receiving $2,244 a month in unspecified disability payments beginning February 2012, he claims no income for 2012.

It will be interesting to see how the East Bay Township project works out.

I'm betting we haven't seen the last of Pohlman.

More on this as it develops.

1 comment:

  1. Silo Ridge coming soon! Or maybe not as it was removed from their website a couple weeks ago and the township was notified that Northern Capital Investments withdrew their application for rezoning. Thank you for reporting this and saving the area from these predators!

    ReplyDelete