“Less than good reputations”
ELIZABETH NELSON:
Welcome to Episode 13 of Hollow Hype. In Episode 12, Heidi presented plans to resolve the bankruptcy of Southtown with the help of new investors. Under one plan, Marge’s equity in the project is valued at $13 million, which Heidi is destined to inherit.
Everything depends on Southtown being a viable project to develop in the future.
The most recent site plan for Southtown was submitted to the Ann Arbor Planning Commission just a few months after the project filed for bankruptcy.
At the Ann Arbor Planning commission, a public commenter raised concerns about the bankruptcy.
[2026 recorded meeting]
KEN GARBER:
The petitioner - Southtown by 4M - filed for chapter 11 bankruptcy on January 27th. You probably know, claims of $35 million by banks and other creditors.
An asset liquidation seems like a possibility at some point.
I'm just raising the question. The development agreement amendment includes very detailed requirements for the petitioner in terms of disclosure and action. So that's my worry. That's one of my worries that there will be a change of ownership and that the city will lose all leverage to require the already voluntary commitment of the petitioner in sustainability. Also, the former architect of the plan has, to the press, expressed doubts about the viability of the micro grid to actually power the entire project.
ELIZABETH NELSON:
Planning Commissioners and city staff were easily reassured by Heidi.
[2026 recorded meeting]
DONNELL WYCHE:
Okay. So if the micro grid has to be resized to you know manage the 289 units, how does that work inside this approval?
ALEXIS DILEO:
I believe the micro grid has already been resized. If it needs to be resized further, their engineers will have to come up with something.
HEIDI:
The design of the micro grid is in compliance with the most recent building code that was just approved about a year ago. So I think your question might allude to some things that would get into the way of approvals by things like, by people or entities like the AHJ. All of those have been considered in the design of the micro grid. Whether it's capacity, which, you didn't ask this question, but as a side note, I will tell you there's more than enough capacity to power the building.
[MUSIC]
My name is Elizabeth Nelson. From 2018 to 2022, I served on Ann Arbor City Council. That experience taught me a lot. Mostly, I learned: people will say just about anything if they think you’ll believe it. This is HOLLOW HYPE.
In April 2026, the City Planning commission discussed the new site plan for Southtown.
[2026 recorded meeting]
COUNCIL MEMBER LISA DISCH:
Question: so does this vote restart the time clock on site plan approval?
ALEXIS DILEO:
Yes, it does.
DONNELL WYCHE:
And that's for 3 years?
ALEXIS DILEO:
Yes, it is.
ELIZABETH NELSON:
That was City Council member Lisa Disch and Planning Commission chair Donnell Wyche, confirming that approval of the site plan would give Heidi three more years to develop Southtown.
One Planning Commissioner noticed that Southtown had unpaid property taxes.
[2026 recorded meeting]
WONWOO LEE:
Cause I am looking up this property, etc. Looks like they may be behind on property taxes. I'm looking at the site and it looks like they haven't been paid. A part of the development agreement stipulates, I think, that they're supposed to be paying kind of all, you know, amounts due to the city.
Yes. I'm specifically referring to section P19. It says in addition to like “developer agrees in addition to any other remedy set forth in the agreement in law or equity if developer fails to make timely or full payments that the city has set forth elsewhere” blah blah blah. A lot of different words here. I'm just wondering if there is a uh if if there's a violation of that particular element in the development agreement?
ELIZABETH NELSON:
City staff discouraged the Planning commission from asking these questions.
[2026 recorded meeting]
HANK KELLEY:
I would not take that into consideration tonight. That is an agreement, as was stated earlier with council. Generally, we don't even bring those full form to the planning commission.
I mean they're coming here in good faith to amend the site plan. I don't think unless you have a reason to think that there's something misrepresented in the site plan or ability to or that something's been, you know, not reviewed properly, I would stick to those items.
ELIZABETH NELSON:
The planning commission was persuaded to set aside any concerns about the development agreement, the bankruptcy, or unpaid property taxes.
[2026 recorded meeting]
RICHARD NORTON:
Well, I just want to clarify. I'm hearing that the staff has reviewed the site plan, has found that it completely complies with the requirements that we are supposed to use to approve the site plan. And I'm not hearing anything from staff to tell us that there's a reason to deny this. And it's a by right approval. So, we shouldn't really even be talking about the financial status of the petitioner or the development agreement. That’s not in our purview.
ELIZABETH NELSON:
That’s how the Ann Arbor planning commission approved a new site plan for Southtown, even though the project was in bankruptcy and owed the City over $150,000. Planning commissioners were told that the terms of a development agreement were between City Council and the property owner. It was not their job to question any of it.
[2026 recorded meeting]
MAYOR CHRISTOPHER TAYLOR:
Good evening everyone and welcome to the June 15 meeting of the Ann Arbor City Council.
ELIZABETH NELSON:
The new development agreement for Southtown went to City Council for a vote.
The new agreement updated Southtown’s required contribution to the City’s park system. Southtown would pay $45,000 more, based on the number of units that were added to the project.
The new agreement also removed a requirement that Southtown meet specific energy and environmental standards prior to the first building permit. The most widely recognized standard for sustainable development is called LEED, from the US Green Building Council. Southtown had previously committed to earning a minimum of two points under LEED standards for Energy and Atmosphere, documented and verified by an independent, qualified professional.
The new development agreement presented to City Council removed the whole paragraph that outlined this requirement.
In a memo, City staff explained that the paragraph was deleted because the standard for measuring it was no longer in the local building code.
At city council, the new development agreement was buried in the consent agenda, where it was approved in a voice vote, along with twenty-five other items. City Council did not discuss it or make any public comments about it.
[MUSIC]
ED SHAFFRAN:
I have been in the real estate development business since the early 80s, I believe 1982 I started tinkering in real estate much earlier than that
I've been involved in probably a hundred plus million dollars of construction in my 40 some years. I have developed a subdivision, condominiums, apartments, office buildings. Done a lot of redevelopment here in the downtown of Ann Arbor
I've assisted some folks that went through the bankruptcy process, been a consultant for the lack of better words from some very high net worth individuals in their real estate matters. I am now sitting on my third bank board as, I guess, the loan real estate specialist on analyzing real estate deals.
ELIZABETH NELSON:
That’s my friend Ed. Twenty-five years ago, the local Ann Arbor Observer wrote a profile of Ed, calling him Mr. Downtown. The name has stuck.
ED SHAFFRAN:
We were the ones that started I guess we were the ones that I should say I but credited for reintroducing loft living in downtown back in the 80s. In this very building here in 1986, I converted it the second floor into nine apartments.
I remember meeting Heidi it was at a coffee shop was she had overheard me chatting with somebody and she introduced herself.
I was talking to I think a contractor, and we were talking about development and she overheard it and she was asking some questions and that's when I first met her and she introduced herself. About you know that they were in the process of buying something or they were looking to buy things here in the town and had a basic conversation. We may have gone to lunch or met at some other time to talk about some business.
I never met Marge. I would not have known her without seeing a picture of her. I would have never, I don't ever recall meeting Marge ever. Everything was always Heidi
ELIZABETH NELSON
Ed and I talked about Heidi’s claim that she spent $19 million acquiring the properties at Southtown.
ED SHAFFRAN:
We represent and manage property for a couple folks that own some single-family homes throughout Ann Arbor
If you bought ten of those with the size of their lot, are you gonna get close to an acre and a half? Yeah, probably.
I could look at how many buildings I could buy downtown for 18 million. I mean, you could damn near buy the PNC. You could probably buy the PNC all the way down to the old chase. You might be able to buy that whole city block for under 18 million for all I know
[MUSIC]
ELIZABETH NELSON:
Weeks before Marge died, a prospectus for Southtown was circulated to investors. That prospectus included a page titled “AS IS Class A Land Value: $61.3 million.” Below that title was a cut and pasted image under the letterhead COLLIERS, a respected appraiser. The image cuts off just after the line that reads $61.3 million.
This incomplete image was circulated to investors as proof that the Southtown block was worth $61.3 million, as is, without anything built on it.
The original letter from Colliers is two full pages. It’s labelled a “Letter of Transmittal” and is intended as a summary of a much larger document. The letter explains that the appraisal is based on a development with 313 units. The most recent site plan for Southtown only permits 289 units. The Colliers letter is also full of disclaimers. It reads:
“The report in its entirety, including all assumptions and limiting conditions, is an integral part of, and inseparable from this letter.”
“The Client may provide only complete, final copies of the Appraisal report in its entirety (but not component parts) to third parties.”
ED SHAFFRAN:
Obviously the deep dive would be to look into this appraisal as to how they extrapolated the value, because they would always have to come up with some examples of other sales. Anything to the contrary, I mean you just don't pick a number out of your hat. You're supposed to find you know a number of recent sales or anything like that, that would achieve that. Again, obviously looking at two pages of a detailed report that's probably a hundred pages thick
ELIZABETH NELSON:
The transmittal letter from Colliers included a section titled “Extraordinary assumptions” and explanation that
“We have been provided with information regarding the subject's development costs, density, FAR and unit mix, as well as the achievable rental rates and other income.”
Colliers explained further that they
“have applied the extraordinary assumption that the data as provided to the appraiser regarding these parameters is correct.”
ED SHAFFRAN:
I mean, there's a lot of missing pieces. I mean, yeah, hard to believe there's just $61 million in land value on a one-acre piece of land. I mean, really? That's what that piece of property is worth? I mean, I just think of other—- U of M just bought 100 acres for $60 million. 100 acres. So, and can you imagine what you can put on 100 acres versus one acre? In all fairness to the Collier folks, hey, what are you telling me here? How are you coming up with a $200,000 plus or minus dollar per unit value? I mean, this isn't Barton Hills. I mean, Barton Hills, you might be able to buy a piece of land for a couple million bucks. And that's an acre, probably? Or plus or minus? That's probably the most expensive land that I know of in Ann Arbor is Barton Hills.
Hines is paying $16 million for the Kline’s lot, $16 million for as much as 800 units. That's not $61 million.
ELIZABETH NELSON:
I’ve wondered how Heidi and Marge were able to assume so much debt, buying so many homes in Ann Arbor. Ed has sat on the boards of banks. He knows the process of review when people apply for loans.
ED SHAFFRAN:
Banks today are more certainly community banks – county national, bank of Ann Arbor – they're lending, but they're going to be smart with their money. They're going to say to you, hey, Elizabeth, this is a great deal. We need 35% equity. So if you want to borrow $5 million from us, hey, we want to see 30% of that in the bank first, your money first, then our money.
They're gonna get an appraisal that says okay show me the most recent figures of construction in Ann Arbor. So you've already got those numbers so the bank is going to take all that information and their credit analysis they're going to run through that. So when it's all said and done that report is probably hundred, hundred fifty pages. I'm telling you, you just can't believe the documents., first of all there's an internal committee with just the lenders, the bank. Then there are the executive loan committee is there's a handful of board members that sit on the executive loan committee, i.e. Ed Shaffran sits on the loan committee at Bank Michigan. So any loans that come in I need to look at that 105 pages and analyze it so I'm looking over the numbers. And then we meet and we discuss it. Is this thing worthy of it, what do we need to do, no we can't do this, we need to change this, Elizabeth has to do this. We're gonna insist that she does this, we need the assignment of her life insurance, we don't want her firstborn but we'll take the second or third born I mean there's a lot of finagling going on to kind of weave through it to make sure that we have it.
[MUSIC]
ELIZABETH NELSON:
Heidi bought her first house in Ann Arbor in 2013, on her own, more than a year before she met Marge. She took out a mortgage for $155,000 using the name Heidi Mitchell. On the mortgage, Heidi is listed at an address in Shaker Heights, Ohio, but she was actually living In Pasadena, California, with a previous wife, Betsy. Heidi and Marge met in October 2014. Less than a year later, Heidi and Marge were co-signing mortgages to buy homes in Ann Arbor. Together, they were able to borrow more money.
ED SHAFFRAN:
The reputation is critical. What track record do they have in the community are they new are they known to the community any past problems? You know politically have they you know prison, drinking. I mean it's amazing what you can find out about people today. obviously right? Especially if you know the drunk driver, the driver's license suspended, credit report, how many bills have they missed. I mean you get it all. If you applied for a loan I'm gonna find out more about Elizabeth Nelson than Elizabeth Nelson knows about herself. It's scary what you can find out about people today. So again, picking up on that, a lot of it has to do with the individual. And quite frankly, does the deal itself make sense, and where is it? where's our collateral?
ELIZABETH NELSON
Obviously, banks scrutinize loans carefully. So how does someone like Heidi get money? Heidi was first convicted of fraud and went to prison in 1987. Since 1987, Heidi has leveraged millions of dollars in loans across three states.
How did she do it?
She got some of these loans with help from elected leaders.
In 2000, the US Department of Agriculture announced a one-year pilot program of expedited loans to provide broadband internet service to rural communities. The program was able to award only $100 million, but it received applications requesting 400 million.
Heidi’s broadband company, Sequelle, was the only applicant from the state of Ohio and she had support from then Ohio Congressman Ted Strickland. Heidi had met Strickland at a conference and apparently made an impression. In September 2000, then Congressman Strickland wrote a letter to the USDA on behalf of Heidi. In his letter, he explained,
“Sequelle, will soon be applying to the USDA for the Community Facility Loan Guarantee Program to secure the bridge financing Sequelle needs in order to initiate start up. As you probably would expect, I believe that the Sequelle endeavor will be a wonderful opportunity for the Wood and Washington county areas to invigorate their economic development.”
Heidi was awarded $3.3 million in federal loans for Sequelle.
Strickland’s letter may have helped.
In 2002, Heidi brought Sequelle to West Virginia to apply for more money and loans. Staff in the governor’s office had concerns about how little collateral she had to offer. Heidi argued that she should get state loans because she had already gotten the federal loans. In a letter to the West Virginia Economic Development Authority, Heidi argued that she had gotten support from a “highly competitive federal program through which less than 10% of the applicant projects were ultimately funded. That statistic speaks volumes about the quality and validity of the Sequelle Communications Alliance business plan.”
[MUSIC]
Heidi ultimately got a $600,000 grant from the state of West Virginia, in addition to loan guarantees for another $500,000. When the plan was approved at the County Commission in Parkersburg, West Virginia, word spread across the river to Marietta, Ohio.
In June 2002, Wood County Commissioner Rick Modesitte sent an email to Keith Burdette, who was then senior assistant to West Virginia Governor Bob Wise. Rick reported to Keith:
The commission met with the people for Sequell and approved the application. It appeared in the paper and we got two or three calls telling us to watch out
As the people behind this have less than good reputations…. According to our calls. Heidi Lowery and her husband have financial problems. You cannot locate them, where they say their office is, it is not. She has a reputation in Marietta for coming up with ideas and never following through. The people who have called us stated that they believe she is going to get the state and federal money, spend it and nothing will be accomplished. We are having our people look into a little more. Thought you should know. You might want to have your people look closer too so we don’t get burnt.
Keith Burdette replied,
I don’t look into these things, but I know the Development office has. Part of the financing plan involves a partner bank so I would guess that if we don’t do a careful review, the participating bank will.
Both the Development office and the bank got burned. When Heidi defaulted on loans from United Bank in Parkersburg, the West Virginia Economic Development Authority was on the hook. Their loan insurance program paid United Bank over $70,000.
Eighteen years after Rick Modesitte raised the alarm about Heidi, County Commissioners in Ann Arbor, Michigan discussed a plan to help Heidi get loans. In 2020, Heidi’s project on Henry Street was awarded special PACE loans, which require approval from the County. Heidi’s Airbnbs on Henry Street qualified for these loans, because of sustainable features like solar panels and EV cars. Heidi borrowed $1.9 million through the program.
The chair of the Washtenaw County Commission, Jason Morgan, explained at the time:
[2020 record meeting]
COUNTY COMMISSION CHAIR JASON MORGAN:
This is a program where the chair of the board has the authority to sign off on these projects in our community but we have not done that before so we thought it would be good to actually bring that to the board, rather than having the chair just sign off on it. And Todd is here to explain to us what that is
TODD WILLIAMS:
We’re very excited that we have a project that is likely to close in June.
While we are still conducting some of our due diligence, we thought we would give a brief update.
I spoke with the developer earlier today, I can tell you. It’s two sets of townhomes geared to young professionals who are just starting out life.
Lean and Green Michigan is the program administrator who works on your behalf to gather the documents, make sure that statutory requirements are met and starts the process of beginning and negotiating the ultimate contract, the special assessment agreement between the lender and the property owner and the county.
COUNTY COMMISSION CHAIR JASON MORGAN:
The document is great, it looks like a cool building.
[MUSIC]
ELIZABETH NELSON:
I reached out to Lean and Green Michigan to learn more. The founder and chief strategist for Lean and Green Michigan is former Congressman Andy Levin. I emailed him some explanation about Heidi and asked him about the PACE program. He clarified that the benefits of PACE loans are not “a gift or grant or anything like that involving government largesse or favor towards a company.” Rather, the program simply provides security to the lender. When I pointed out that this security might also be a benefit to the person borrowing the money, he replied that
“these PACE lenders aren’t little fish easily duped by a crooked person, but rather national financial companies doing hundreds of millions and even billions of dollars of PACE.” In other words: the banks do their own due diligence.
In both West Virginia and Michigan, we assume that banks would never lend millions of dollars to someone like Heidi.
ED SHAFFRAN:
I think with all the stuff that's coming out, there's a lot of people that go, who is this? Who are these people? And if you think about it, the average person isn't going to walk down the street and meet them and have any dealings with them. The only people are going to be anybody that's invested with them or work with them. So I guess the question would be, what's their relationship with their employees and their ex-employees? Isn't that when you generally give a reference? Of course, everybody gives a reference of all their friends, right? They don't give you a reference to the people that you pissed off or not.
ELIZABETH NELSON:
Thanks for listening. Visit HollowHype.com to find more information about this episode.
Coming up in episode 14: the bankruptcy of Southtown is getting messy. Heidi needs more money and the number of creditors seems to be growing.
If you have something to share about Heidi’s activities in Michigan, Ohio, West Virginia, or California. Please reach out to hollowhypepodcast@gmail.com
