This story was first published by Aaron Mondry of Outlier Media. WXYZ is a proud partner of Outlier Media.
Related: What is property speculation — and who’s doing it in Detroit?
Dennis Kefallinos: Detroit’s most notorious speculator
Wayne State University was looking for a buyer for its shuttered Shapero Hall near downtown in 2007. The brick building from the 1950s once housed the university’s pharmacy program, but had been vacant for years. The school was eager to sell to a developer who would save it.
Up stepped Dennis Kefallinos — a surprising suitor. He had converted some defunct warehouses into apartment buildings but left a lot of his properties empty, seeming to wait for something to happen to them rather than investing enough to reopen them.
Kefallinos said he wanted to save Shapero Hall. He told Crain’s Detroit Business he was considering a mixed-use development of apartments and ground-floor retail.
“This is a really unique building,” he said. “I didn’t want to see it demolished.”
He bought the building and land in Lafayette Park that year for $2.3 million.
Shapero Hall was demolished 11 years later. Developers knocked it down to build apartments and condos.
Kefallinos made out handsomely. The developers paid him $16 million for the building in 2018. One Detroit journalist called it a “property speculation home run.” Shapero Hall sat vacant and unused during the time he owned it with no obvious signs of improvement. He paid no more than $300,000 in taxes on the property.
Kefallinos has cost the city and other developers a lot of money using a simple playbook: Buy many properties, pay very little, invest even less.
He may be one of the most well-known speculators in Detroit, but he’s hardly alone. Tax overassessments by the city and no-holds-barred policies by Wayne County contributed to the foreclosure of tens of thousands of Detroit properties, which were sold at bargain-basement prices to basically anybody. Speculators bought up an estimated 90% of these properties between 2005 and 2015.
Plenty of real estate speculators and landlords hide behind lawyers or use registering services to file limited liability companies for them. But Kefallinos largely operates in the open, putting his own or relatives’ names on paperwork for the several dozen limited liability companies he uses to hold properties.
There have historically been few consequences for speculating on real estate in Detroit. The city has collected less than half the fines on blight tickets it’s issued since 2018. At the same time, it has rewarded bad actors with generous deals to facilitate development. The county treasurer’s office, meanwhile, let those in violation of its own rules continue to buy property at the annual foreclosure auction.
Including Kefallinos. He bought more than a third of his current portfolio at the auction, according to data from Regrid, and continues to make deals there. He spent $425,083 on nine properties in the 2022 auction, despite owing hundreds of thousands of dollars in property taxes and unpaid blight tickets.
The scale at which speculators have been able to operate in Detroit — and the effects on neighborhoods, families and the real estate market — is difficult to overstate. Detroit has paid the price for speculators’ mostly unchecked activity in lost tax revenue, dilapidated properties that require taxpayer-funded demolition, and huge swaths of the city pockmarked with blight or vacant land. By hoarding real estate, speculators also prevented other people from developing those properties.
Kefallinos declined Outlier Media’s interview requests. Niko Matsamakis, general manager for Kefallinos’ business operations, says his boss is not a speculator. He said Kefallinos is investing more in his buildings than if they were in the hands of the city or another owner.
“We’re not just sitting on these buildings,” Matsamakis said. “You might not be able to see it in one big development, but every one of Dennis’ buildings is getting — even if it's a little attention — more than it’s received in the last 20 years.”
Some of Kefallinos’ most well-known properties include the Russell Industrial Center, Michigan Building and Theater, Goeschel Building, Roosevelt Hotel and Brooklyn Lofts.
Eric Hergenreder blogs about Detroit’s historic buildings — including many owned by Kefallinos. He said some of Kefallinos’ buildings are secured, some aren’t.
“He appears to do just enough to ensure that his buildings aren’t razed,” Hergenreder said. “When he’s threatened with demolition, the relevant properties typically see work to bring them off the brink of the wrecking ball, but not much more.”
Outlier Media identified 292 Detroit properties in the public record owned by Kefallinos at the time of publication using property data from Regrid and the Wayne County Register of Deeds. Around half are vacant lots or surface parking lots.
We could only confirm that 19 properties, or a little more than 6% of his portfolio, are occupied.
Debris has fallen onto the street at his properties. He’s racked up 3,440 blight tickets in the last two decades and owes more than $550,000 in unpaid fees to the city. Nearly a third of those violations are for failing to obtain a certificate of compliance or register properties with the city. Hundreds more are for excessive weeds, rodents, bulk waste and unsafe property conditions that make buildings “unfit for human occupancy.”
Matsamakis said Kefallinos is currently challenging hundreds of thousands of dollars in blight tickets for issues they say have already been corrected.
Kefallinos has largely avoided consequences, although the city has initiated more lawsuits against negligent property owners in recent years — including several against Kefallinos.
Detroit is suing Kefallinos to push him to demolish or repair at least 14 of his properties. They include the historic Michigan Building and Theater downtown. The city claims in a lawsuit that parts of the building’s exterior collapsed onto the street, “threatening the safety of pedestrians.”
“Mr. Kefallinos has not met the minimum standards,” Detroit’s Corporation Counsel Conrad Mallett told Outlier. “It’s a public nuisance.”
Immigrant success story
Dennis, born Dionysus, told the Detroit Free Press in a 1986 profile that he emigrated from Greece to the U.S. when he was 14 years old. He said he worked seven days a week as a busboy, dishwasher and waiter, saving enough money in just six years to start his own restaurant.
Kefallinos opened Niki’s in Greektown in 1981. Soon after, he started buying up real estate and hasn’t stopped. He bought his Grosse Pointe Farms home in 1998, which tax records suggest is now worth more than $1 million.
The largest and most profitable property in his portfolio is the Russell Industrial Center, which he bought in 2003. The approximately 1-million-square-foot former factory hosts studio space for artists and small businesses.
Kefallinos has a particular penchant for industrial-to-loft conversions and owns 10 such buildings. He said in an interview with Model D in 2010 that he often buys buildings without a plan for what he wants to do with them.
He’s floated plenty of development ideas over the years. He said he wanted to turn the gutted Michigan Theater into an event space, bring back the long-abandoned Roosevelt Hotel, create microapartments downtown, redevelop an old slaughterhouse in Eastern Market and turn a disused school into apartments.
Like the redevelopment of Shapero Hall, he has yet to finish — or, in some cases, start — these projects.
He may not have done much development over the years, but he’s flipped plenty of properties.
He sold the former American Hotel for $2.1 million, the S.S. Kresge Building for about $2.7 million, another loft building in Harmonie Park for roughly $5.9 million, the Harvard Square Apartments for almost $6.3 million, the former Southwest Detroit Hospital for $6.5 million, two extremely desirable downtown buildings to Bedrock Detroit for undisclosed amounts and Shapero Hall for $16 million.
These big-ticket sales represent a tiny percentage of the properties he’s bought and sold. He owns nearly 300 properties today but claimed to own 400 in 2008.
‘In the pen with the old dogs’
Matsamakis said most people, especially the city, have Kefallinos all wrong. He described his boss as passionate about Detroit and saving its historic architecture.
“Dennis has been working every day in the city for 50 years now,” he said. “Every dollar he makes in the city of Detroit gets reinvested into the city of Detroit. And all of his developments have been self-funded. Nothing ever comes from taxpayers.”
Matsamakis said he has been trying to professionalize, streamline and move projects along for his 69-year-old boss. He admitted that in the past, Kefallinos might not have gone about development in the best way, cutting corners or “ruffling some feathers.” But that’s been slowly changing since he started working for the property tycoon in 2020, when Matsamakis was 25.
“It’s hard to teach an old dog new tricks,” he said. “And I’m in the pen with the old dogs.”
Matsamakis cited two reasons for Kefallinos’ unfinished projects. One is the COVID-19 pandemic, which hurt cash flow from his rental projects. The other is that the city keeps getting in Kefallinos’ way with what he describes as frivolous blight tickets, demolition orders and lawsuits. He thinks the city doesn’t want them to succeed so that it can point to Kefallinos as “public enemy No. 1.”
“The city is spreading us thin,” Matsamakis said, “making us show up to this building or that building to address a dangerous condition that might have existed 10 years ago but doesn’t today. And then they’re still trying to demolish it, which requires us to file a lawsuit to stop it.”
They’re still managing to move projects along, he said.
One of the active projects is a former cold storage facility in Corktown. He said they plan to lease the first two floors to retail and small business tenants, and hope to be ready by next summer.
Another is the former slaughterhouse in Eastern Market that’s nearly ready to open as a bar.
Matsamakis couldn’t say how much these projects cost, saying the work is done piecemeal when there’s solid cash flow.
“There’s not necessarily a set budget,” he said. “That’s another big hurdle I’m trying to overcome.”
He cited a long list of extenuating circumstances for why other projects remain unfinished.
Kefallinos pulled permits for redeveloping Shapero Hall around 2013, but then it caught fire. He planned to redevelop the Southwest Detroit Hospital into a kind of shopping mall when the city suddenly put it on the demolition list. He started on the Roosevelt Hotel until a water main break last year flooded the basement. The Corktown building required a number of alterations to the architectural drawings and permits.
Matsamakis hopes Kefallinos’ reputation will change as more new developments open. But he stressed patience, saying these projects take time because of the older buildings he prefers working with.
“The buildings that he buys come with issues,” he said.
Frustrated tenants
Kefallinos’ tenants at one of his few occupied buildings are skeptical that their landlord will come through with promised improvements, considering how little has been done where they rent.
Renters at the Russell Industrial Center have long complained about poor conditions and mismanagement of the sprawling complex. In 2017, the city abruptly closed the Russell over safety concerns and repeated building code violations. It reopened two weeks later after Kefallinos began emergency repairs.
Current tenants say the situation is more or less the same.
Karen Sepanski is a multimedia artist who’s been a tenant at the Russell since 2019. She said management is almost nonexistent and complained about lax security, excruciatingly slow repairs, malfunctioning elevators and an absence of janitorial services. Meanwhile, she’s been hit with several rent increases.
“As far as I can tell, there’s never been any maintenance at this place, ever, by anyone,” Sepanski said.
Sepanski needed a space large enough to accommodate all her supplies. She felt like the Russell was her only option, even though she was aware of its reputation.
At $795 a month in rent, she’s not sure it’s worth it. But she also feels stuck.
“If I could move out, I would,” Sepanski said. “But I’d have to unload a lot of stuff first.”
Matsamakis said the closure of the Russell in 2017, even though temporary, hurt its community. Many artists left, and management replaced them with what Matsamakis calls less desirable tenants who didn’t have the same level of respect for the building and its culture.
“The Russell was an artists-driven community,” he said. “That’s changed a lot, and we’re trying to bring it back.”
Matsamakis added that rent and utility increases have been necessary to keep the Russell afloat.
Fed up
The city has begun to lose patience with property owners it considers negligent. Last year, it hit four of Kefallinos’ buildings with nuisance lawsuits and added the Michigan Building to that list earlier this year.
“The City of Detroit has been struggling for decades to deal with owners like Mr. Kefallinos who allow their properties to deteriorate,” Mallett said. “We cannot simply give these owners perpetual permission to violate the law.”
When Kefallinos bought the Michigan Building in 2014, he said he was excited to redevelop the theater.
“I want to restore it back to what it was,” Kefallinos told Crain’s at the time. “I’m not going to cut corners on the lighting, for example.”
Today, it’s a parking garage, albeit a rather unique one. A city inspector cited in the lawsuit said it’s in “an advanced state of disrepair ... such that it presents a fire, safety and health hazard, and shows signs of deteriorated interior and exterior structural condition.”
Matsamakis said the city presented no evidence that pieces of the building’s facade fell onto the street. He said the interior is secured and in good condition.
The city’s strategy may be bearing some fruit. Earlier this year, Kefallinos sold the Southwest Detroit Hospital to Detroit City FC, which plans to build a soccer stadium. He let the former Civic Theater fall into tax foreclosure. The Corktown cold storage building is currently being redeveloped, though Matsamakis said they pulled permits two years before the lawsuit.
“This all takes a very long time,” Mallett said. “It’s a very complicated process and people take full advantage of all of the rules in order to make sure they don’t invest in their properties.”
This article first appeared on Outlier Media and is republished here under a Creative Commons license.
