Lawsuit: 'Conspiracy' caused The Heights at Eastwood to flounder in Lansing Township

Clarification: This article has been updated to clarify that Eastwood LLC once owned the land that houses Eastwood Towne Center.

LANSING TWP. – A federal lawsuit alleges an "illegal and fraudulent real estate enterprise" deliberately stalled development at The Heights at Eastwood, a commercial space in Lansing Township.

Mimi's Sweet Shop, a local business specializing in ice cream and candy, filed the lawsuit this spring in the U.S. District Court for the Western District of Michigan.

The lawsuit alleges defendants Steven Hayward and Michael Eyde stymied commercial growth at the Heights as they conspired to give preferential treatment to businesses connected to entities they control.

Hayward is executive director of Lansing Township's Eastwood Downtown Development Authority, which oversees development of The Heights.

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Hayward also has worked as a paid contract employee for Eyde.

Eyde founded Eastwood, LLC, a property holding company that once owned the land that houses Eastwood Towne Center, an upscale outdoor shopping mall just south of The Heights.

Mimi's Sweet Shop is also suing Eastwood LLC., Lansing Township, Townseast LLC and Towneast LLC Parking. Towneast and Towneast Parking are property holding companies for The Heights and the development's parking garage, respectively.

Michael Matheson, an attorney for the defendants, did not respond to a request for comment.

Mimi's Sweet Shop signed its lease with The Heights in 2015.

The lawsuit alleges Hayward made a series of misrepresentations to prospective tenants that inflated the value of The Heights so he could charge higher rents.

Among other "promises and/or representations," the suit alleges Hayward indicated The Heights would be fully leased by the time Mimi's Sweet Shop opened in May 2016. Yet, The Heights never reached even 30% commercial occupancy, the lawsuit states.

Mimi's Sweet Shop owner Margaret Mary Sanders is the daughter of former Lansing Township Supervisor Kathy Rodgers. Rodgers, who left the township in 2016, could not be reached for comment.

The current township supervisor, Diontrae Hayes, did not return a request for comment.

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Mimi's Sweet Shop argues its business suffered because Hayward failed to deliver on promises to bring more retail tenants that would increase foot traffic to the area.

While acting in his official capacity for the township's DDA, Hayward "arbitrarily" vetoed a proposed lease from Bar Louie Restaurant and Sports Bar, even though the bar would have increased foot traffic at The Heights, according to the lawsuit.

The plaintiff argues Hayward did so because the restaurant would have competed with Boston's Restaurant and Sports Bar, which is located at Centre Boulevard on land developed by Eyde. Hayward received a contract to work as project manager for construction of Boston's Restaurant, the lawsuit states.

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The lawsuit alleges Hayward and Eyde engaged in illegal conduct, including "insider deals, blocking additional development at the Heights, kickbacks and sweetheart construction contracts, all of which were designed to cause property investors to pay and lending institutions to loan artificially high amounts of money."

Judge Janet T. Neff has allowed the defendants until May 23 to file a response to the lawsuit.

Mimi's Sweet Shop is asking for at least $225,000 in damages.

Jacob Perrone, an attorney representing the sweet shop, declined to comment, citing the ongoing nature of the litigation.

The Heights and its parking ramp were built by the township's DDA, using public bonds and with authorization from the township board. The original business plan called for the DDA to own the commercial space under the ramp and generate income from rents. That income was to pay both the bonds used to fund construction and the $1 million annual lease payment to Eyde for the land where the Heights was built.

A Lansing State Journal investigation published in 2016 found that the Heights had encumbered the township and its DDA with more than $200 million in long-term debts and lease obligations and that project had never raised enough rent revenue to make the annual lease payment to Eyde. The Towneast joint venture was designed to stabilize the project but has been controversial, in part because the joint venture does not make its decisions in open public meetings the way the DDA does.

The Heights includes retail shops, restaurants and office space. Adjacent hotels and apartments are not held by the Towneast joint venture between Eyde and the DDA.

Contact Sarah Lehr at (517) 377-1056 or slehr@lsj.com. Follow her on Twitter @SarahGLehr.