Court Could Effectively Block Northridge Sale To Phoenix Investors

Northridge Mall in August 2022. Photo by Jeramey Jannene.

The legal saga surrounding Northridge Mall could be coming to an end. And it could end up with the city taking ownership of the long-vacant mall.

Judge William Sosnay, in a hearing Friday, said it was “premature” to immediately approve the city’s January request to take ownership of the property, but said he would entertain the motion if made after the Court of Appeals rules.

“I will do everything I can to bring it to some conclusion, one way or another,” said Sosnay. The case started on April 11, 2019 when the city announced it was issuing raze orders because the repair costs exceed 50% of the building’s assessed value. Black Spruce has repeatedly contested and appealed the matter.

The city’s deed request would strip the mall’s Chinese ownership group, U.S. Black Spruce Enterprise Group, of possession of the property for failure to comply with a raze order to clear the dilapidated 900,000-square-foot structure. It would end a contempt order that now includes more than $400,000 in fines for failure to secure the property, which has been the site of several years of repeated break-ins.

The city, through deputy city attorney Odalo J. Ohiku, maintains it has publicly-unidentified resources that render it ready to demolish the complex should it be given the authority.

But in addition to waiting on the appeals court to rule on Black Spruce’s challenge to the raze order, Sosnay and the city might also need to contend with Phoenix Investors‘ interest in buying the property and repurposing it as warehouse space.

After meeting with Phoenix officials on March 27, the city submitted a written objection to Phoenix’s desire to use the existing buildings as warehouse space.

“We would be remiss to recommend support for your proposed zoning change, given that industrial storage does not promote meaningful job growth. It is not compatible with the community’s redevelopment goals based on past, public visioning sessions,” wrote assistant city attorney Theresa Montag in a March 29 filing.

The property is currently zoned for retail uses, though multiple city plans and studies have explored repurposing the 46-acre site and surrounding properties for a variety of uses. City officials have long supported industrial redevelopment of retail properties, but often on the condition that they provide a substantial number of jobs. Phoenix’s plans encompass 400 to 500 jobs it said.

Phoenix specializes in industrial property development and several of its Milwaukee projects have involved redeveloping former big box stores.

After revealing its interest in the property on March 17, Phoenix has paid for security for the property. That includes boarding up the buildings, installing two camera poles, clearing 22 dumpsters worth of debris and having on-site personnel said Black Spruce attorney Christopher M. Kloth.

Sosnay said Phoenix’s quick action to secure the property did reveal that Black Spruce could have done more. It has a 2019 agreement with the city to secure the property.

“I am afraid that even you would have to acknowledge that your efforts up every short,” said Sosnay to Black Spruce executive director Li Yang. He said Phoenix’s fast action strengthened his earlier contempt orders. “This all could have been done months ago.”

The city has called Phoenix’s interest a “delay tactic” and Sosnay, in March, said it didn’t “pass the smell test.”

Important Dates Loom

“This thing has gone on far too long,” said Sosnay. “Once we ultimately get a decision from the Court of Appeals, I don’t want another six months or a year for the ultimate decision [to demolish the property].”

Three important dates are upcoming in the case.

Phoenix’s offer to purchase the property, filed under seal, reportedly expires May 1. Failure to close on the purchase could result in the company being pushed out of the process and Black Spruce needing to again secure the property on its own.

The City of Milwaukee must file its brief in the appeals case by May 11. Black Spruce’s filing was made earlier this week. A separate firm, Hansen Reynolds, is representing Black Spruce in its appeal of the raze order. Black Spruce would be given a window to respond to the city’s filing before a three-judge panel would issue a written ruling.

The next hearing on the circuit court case is set for June 20.

Sosnay also promised media members that he would unseal Phoenix’s purchase offer for the property by Wednesday unless an objection is successfully made.

Bids are due today in the city’s push to demolish the one building it owns at the site, the former Boston Store. Department of City Development representative Benjamin Timm said the city has a contractor that visits the building regularly to secure it. “We do have breaches, but we address them right away,” he told the court.

An Ethanol Plant?

Yang, who said she only oversees Black Spruce’s sole U.S. investment and hasn’t been paid in years, made her second appearance in the case. She said Jun Lian is the principal shareholder in the firm, which also has investments in “hotels and other businesses in China and other southeastern Asian countries.”

Black Spruce has long been reported to have been interested in developing an Asian marketplace at the property after acquiring it for $6 million in 2008. But Yang revealed that wasn’t the original plan.

“We purchased the Northridge property for industrial usage in the very beginning,” said Yang. “Mr. Lian wanted to use the property for corn processing.” She said he previously had investments in factories and trading in other countries.

Yang specifically referenced the Northridge site’s suspected suitability for an ethanol plant and generation of the ethanol-production byproduct distiller’s dried grains with solubles (DDGS).

DDGS is sold for use as livestock feed in less resource-rich countries. A new facility at the port will open this spring that will export DDGS to the Middle East, Asia and other regions of the world.

But turning Northridge into an ethanol plant would have posed a number of challenges for Black Spruce, including its lack of railroad access and the need for a zoning change. Ethanol plants are commonly located in small cities near rural areas.

Yang, who is based in Canada, said she hasn’t seen the China-based Lian in person in “a couple of years.”

Yang, through attorney Kloth, declined questions after the hearing.

The mall, located near N. 76th St. and W. Brown Deer Rd., opened in 1972 and closed in 2003.

August 2022 Photos

April 2019 Photos