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Gary E
04-01-2006, 10:06 PM
Down and Out in Bloomfield Hills
As Detroit wobbles, even its toniest suburbs feel ripples from the woes of GM and Ford.
By JEFFREY ZASLOW
April 1, 2006; Page A1

http://online.wsj.com/article/SB114385942611314308.html?mod=home_we_banner_left

BLOOMFIELD HILLS, Mich. -- Foreclosures are up and charitable giving is down. A local country club has a waiting list -- for members who want to quit. The market for expensive homes is so slow that Michael Robbins, a divorce attorney here, says one of his clients is still living with his ex -- three months after the divorce was final.

With the Michigan economy battered by the ailing auto industry, the ripples are being felt across the state -- even here in one of the nation's wealthiest communities. At a time when there's a growing gap between the rich and the poor, Bloomfield Hills offers a clear reminder that the wealthy often can't escape from the severe problems of a local economy. And that, in turn, is putting pressure on a wider swath of less-wealthy residents who depend on the rich for business.

That people are feeling down and out in Bloomfield Hills is certainly a matter of degree. Blue-collar workers, in a state that lost 21,000 jobs since November alone, have far-bigger worries -- about feeding families and paying health-care bills. And thousands of auto workers, now considering taking lump-sum buyouts recently proposed by General Motors Corp., are struggling over the question of how they'll support themselves once the quick-cash fix is gone. Just yesterday, auto-parts supplier Delphi Corp. announced plans to cut 25% of its salaried positions, while proposing to cancel labor contracts and retiree medical benefits. (See related article.)

Oakland County, where Bloomfield Hills is located, is the nation's fourth-wealthiest county with a population of more than one million, according to the latest per capita income data from the Commerce Department. Much of that money is connected to the fortunes of U.S. auto makers, making residents unusually vulnerable to the fate of a single industry. Unlike some major U.S. cities, Detroit is home to almost none of the richest residents in its area. They long ago moved on to a few select suburbs, including Bloomfield Hills.

Located about 10 miles from Detroit, Bloomfield Hills is a favorite enclave of the rich. Its first estates were built in the 1890s. Some mansions sit near private lakes, or are set back on winding roads, out of view to passersby. The priciest home for sale is a 22,000-square-foot mansion listed at $14.75 million. Bloomfield Hills has about 4,000 residents; 45,000 more live in surrounding Bloomfield Township.

From California's Silicon Valley to Texas's oil fields, regional economies are always affected by the cycles of local industries, and often bounce back after tough times. But Bloomfield Hills is heavily reliant on the health of two companies, Ford Motor Co. and GM -- both of which are undergoing massive structural changes. After losing billions and laying off tens of thousands of workers, GM and Ford are likely to become much smaller companies overall, and especially in the Detroit area, as the auto industry shifts west and south to states with lower labor costs.
[Enclave Under Pressure]

For Walt Griffin, who owns a mortgage business, the slow-down is hitting from both directions. He has been trying for a year to sell his 9,800-square-foot house. It has an indoor basketball court, a sauna, six bathrooms and once belonged to former Detroit Pistons star Isiah Thomas. The price of his house has been lowered to $1.75 million from $2.2 million. At the current rate of sales, there is a 41-month supply of houses for sale in the area that are priced at more than $1 million.

At the same time, given "an upper-end loan market that's just dead," Mr. Griffin, 43, says his mortgage company's revenue is down about 70% since 2003. He has cut his staff in the last 18 months to six from 12, and his office space from 3,000 square feet to 1,200.

Sixteen Bloomfield Hills-area homes are in some stage of foreclosure, compared with five in 2004, according to Foreclosure.com, a service that tracks foreclosures nationwide. In Oakland County, 723 homes are in foreclosure, more than double the 334 in February 2004. Michigan now has twice as many homes in foreclosure as it did in February 2004, and the state's current foreclosure rate is about two-and-a-half times as high as the national average.

Across Bloomfield Hills, residents are changing their lifestyles in ways large and small. The 325-member Forest Lake Country Club says it has a 20-person waiting list to get out of the club. (Last year, there were just four people on this list.) In order to get back a portion of their equity in the club, these members have to pay $540 a month in dues until new blood can be found to take their slots. To lure new members, the club has cut its initiation fee to $15,000 from $45,000.

The famed Oakland Hills Country Club, site of many pro championships, still has a waiting list to get in, but some members aren't as willing to splurge on guests, the club says. Members are charged $175 to bring a friend along for 18 holes on the club's top course.

At Erhard BMW in Bloomfield Hills, sales are down 10% to 15% from last year. Some customers have told Erhard salespeople that they'll be switching to less-expensive domestic cars, such as GM's Cadillac, says Alan Graham, Erhard's general manager. "They're trying to kill two birds with one stone," he says. "They say they want to support the Detroit economy. And they want to save dollars."

Stanford Krandall, who lives in Bloomfield Hills, is closing his family's jewelry business, located nearby. Founded by his great-grandfather in 1911, Sidney Krandall & Sons catered to some of the area's richest residents. But sales were down more than 25% since 2003. Mr. Krandall, 51, says customers would often look at a high-priced piece of jewelry, say how much they loved it, and then decline to buy it. He says they'd admit they wouldn't make the purchase because they're nervous about the economy or their jobs. "They feel they owe you an explanation," he says.
[William Armstrong]

William Armstrong, a 51-year-old Bloomfield Hills resident, was an engineer at Ford for 27 years. He was among several thousand salaried workers laid off in January. He says he and his wife "are now living as frugally as we can." They don't go out to dinner, they watch what they buy at the supermarket, and he has put on hold plans to buy a new Shelby Mustang for about $45,000. He says he was earning $95,000 a year.

He received three months severance, but declined to take an extra nine months given to those who signed agreements waiving their rights to sue for discrimination. He is suing for age discrimination. "The company adhered to the law in making these difficult decisions," a Ford spokeswoman says.

As a hobby, Mr. Armstrong owns four classic cars that he works on, all Fords. "I'm still a Ford fan and a Ford man," he says. But for now, he's put off tinkering on his cars, to save money. Because he says he lost privileges at Ford's fitness center when he lost his job, he has joined a gym. He works out to reduce stress and stay in shape, he says, so he'll look his best as he seeks work.

Anna DiMaria, 65, ran beauty businesses in the area for nearly four decades. But last summer, she closed down her once-thriving Capelli Spa because she says at least 30% of her wealthy client base had cut back on visits or stopped coming. "Instead of getting facials every month, they'd get them every three months," she says. "They'd say, 'My husband and I have talked it over. We're taking a cut in our luxuries.' "

Some clients were getting their false nails taken off to save the $70 monthly maintenance fee, says Ms. DiMaria. "They'd tell me, 'I want to let my nails breath.' They didn't want to reveal it was an economic decision."
[Anna DiMaria]

Maxine Brainer, who was a client of Ms. DiMaria's for 21 years, says she used to go to the spa weekly, often spending about $450. But toward the end, she came less frequently, and spent about $200 when she did. Ms. Brainer says she's being careful about spending, in part because her husband's wholesale-flower and greenhouse business has seen declining sales. Many customers aren't planting annuals this year, and they're cutting back on perennials, she says. "The wealthy are watching their money. They're not doing all the ground cover they did five years ago."

Some are making cutbacks in part for the sake of appearance. For instance, those who fly in private jets are often taking less-expensive, smaller limousines to and from the airport. "Even if they're doing well, with everybody else struggling, they don't want to be seen as ostentatious," says Leo Savoie, a Bloomfield Township trustee who owns several businesses here, including Luxury Limo. About 40% of clients now book the company's smaller sedans rather than its stretch limos, he says, compared with 20% in 2002. The cost of renting the sedans is about $45 an hour, instead of $75 an hour.

In nearby West Bloomfield, Angelo's Bistro lowered its prices almost 30% in January, and took away the tablecloths and upper-end menu items, such as pasta with lobster. It changed its name to Angelo's Greek Restaurant. As an upscale eatery, business had been suffering in the last year, says owner Angelo Georgizas, who opened this restaurant in 2003, and has run others in the area for 22 years.

Patrons kept telling him that they still wanted to go out to dinner several nights a week, he says, but given the economy, no longer wanted to pay $18 or $20 per entrée. Now, with prices as low as $9.95 for entrées such as gyros and a spinach-pie platter, revenue is up 25%.

"I have a lot of very wealthy people in here," says Mr. Georgizas. "To save money, they order the specials." He says some patrons have admitted to him that they now have a drink or two at home before coming to the restaurant, so they won't spend as much on drinks at dinner.

At Hotel Baronette, in Novi, Mich., where many Bloomfield Hills residents have weddings and bar- and bat-mitzvahs, catering revenue is down about 30% in the last five years, says catering manager Kathy Charnley. She used to require that people hosting parties in the ballroom agree to spend at least $12,000 on food and beverages for a Saturday night event, and $10,000 for Fridays. Now, on some weekends, "I'll waive the minimums just to get a party in there," she says.

More hosts are serving chicken instead of steak, and decorations are less extravagant. But bar bills are higher these days, says Ms. Charnley. "When the economy gets bad, bar bills go up," she says. In 2001, her average guest drank $15 in liquor at a bar mitzvah, and $18 at a wedding. These days, the average is $19 at a bar mitzvah and $25 at a wedding. The Baronette hasn't raised liquor prices.

The ripple of blue-collar woes is beginning to affect doctors in the area. Bashar Succar, an ear-nose-and-throat physician who lives in Bloomfield Hills, practices in Pontiac, Mich., where about 25% of his patients are auto workers. Given the layoffs already under way, and those ahead, "I've noticed that in the last few weeks, people have been coming to have their surgery done because they're going to lose insurance," he says.

He expects his patient load to fall 10% in the year ahead, as patients skip appointments to cut down on health-care costs. Meanwhile, the number of indigent patients his practice is treating has risen more than 50% since last year, to seven or eight people per week, he says. Given these signals in his business, Dr. Succar has been reevaluating his own finances. "I'm definitely cutting expenses," he says. "We're working on a budget now. We're worrying about the future and what's coming."

GM recently reached a deal with the United Auto Workers union to cut an array of benefits, including $1 billion in annual health-care costs.

Other doctors have already seen a decline in visits. Cardiologists at Michigan Heart Group live in Bloomfield Hills or nearby communities. They averaged 2,428 patient visits in 2005, the Troy, Mich.-based medical group says. That's 420 fewer visits per doctor than the practice saw in 2003.

Such changes in her community don't surprise Ms. DiMaria, 65, who says she closed down her spa business partly because clients kept confiding their fears about the economy -- and she saw the writing on the wall.

Wanting to cut expenses, she also put her 3,100-square-foot Bloomfield Hills home up for sale last year. A house on her street sold for $630,000 in 2003, and her real-estate agent, Lynn Fink, says it had fewer amenities. So Ms. DiMaria's home was advertised at "$610,000 for quick sale." It didn't sell. It was eventually reduced to $550,000. In an effort to lure other agents to bring clients by, Ms. Fink offered an enhanced commission, and held a drawing in which real-estate agents could win a $100 gift certificate to a local mall. But for seven months, no offers came.

Ms. DiMaria knew the market was against her. In 2005, there were 388 home listings from Bloomfield Hills submitted to Realcomp II Ltd., the largest Michigan multiple-listing service. That's up 34% from 257 homes listed in 2000. Just 56 homes were sold last year in Bloomfield Hills, down 45% from the 101 sold in 2000.

Last month, Ms. DiMaria accepted an offer for less than the current asking price. She plans to move to an apartment in the area.

One recent afternoon, she sat in her kitchen reminiscing about the changes in her life and the glory days at her spa. She says she used to sell $250,000 a year in gift certificates alone. About 30 times a year, she'd sell special packages to brides. For $3,000 to $5,000 for the day, a bride-to-be would bring all her bridesmaids, her mother and mother-in-law for manicures, massages, a gourmet lunch and champagne. They would receive goody bags filled with creams, neck-pillows and jewelry. "They'd meet in the dining room wearing fluffy slippers and robes, with their hair in towels," she says. "It was so nice."

But in her last year, she sold only 12 such days, she says, "and most of them cut out the bridesmaids."

Ms. DiMaria sees the difference in her own life. She used to shop for clothes at a high-end nearby mall and buy whatever interested her. She still goes there, "but now I ask the salespeople to call me when something is marked down," she says. "Nowadays, that's what people do."

Dan McCosh
04-02-2006, 05:08 PM
It's a kind of interesting story, but so muddled, I can't figure it out. Bloomfield Hills itself is only about a mile square, and as far as I know has no private lakes, and no country clubs. My high school had a considerably larger population. It is usually confused with the other "Bloomfields"--Blooomfield Township and West Bloomfield which in total are more than 36 square miles. Most of the story mixes up the area. Part of it is actually pretty poor, much of it is rich, and Bloomfield Hills itself has always ranked among the wealthiest incorporated cities in the nation. I don't think any making a lousy $95,000 a year lives there. As for waiting three months to sell a house in Michigan, for a couple of years the average wait was more like a year.
I don't think too many Bloomfield Hills residents are employed by auto companies--they are more likely to own one. Of course, that can be pretty tough these days as well.

Beowolf
04-02-2006, 07:44 PM
When I student taught, I lived with some family in that area. They lived on Square Lake. (The lake, not the road). And just south of them was a country club on Square Lake Road, just west of Telegraph. Can't remember the name of the country club, but based on the length of it's driveway, I always figured it was fairly hoighty-toighty. (Is that Forest Lake CC?) I always thought that all of that was included in Bloomfield Hills.

Recently visited a friend in Franklin Twp. Now there's some cash that place. Can't be more than .25 sq. miles altogether, but talk about $/capita...

Also, isn't Oakland Hills Country club on 18 mile, east of telegraph? If that's the one I'm thinking of, then I think its just before you get into Birmingham. I dunno, been a long time since I've hung out around there.

Jeff

ahp
04-02-2006, 09:08 PM
What does one do with a 9800 square foot house when you can't rent it, don't have the money to run it, pay the mortgage, pay the taxes, or heat it. There is an old solution that works, with a zoning change, cut it into twenty appartments. It has been done before.

Then there is another that is real quick - fire. When we were living near Lawrence Massachusetts there was a time when abandoned properties were going up in smoke left and right.

It worked like this. Some guy without a name would approch some punky kids on a street corner and ask them if they would like to make some money easy. Yes, and he would peal off about $200 and point to an empty multi family house and say that there was more where that came from if there was no house there next week.

Katherine
04-02-2006, 09:27 PM
When I was in college, I worked in West Bloomfield. I drove through there this weekend. No one really seems to be hurting for cash there. :rolleyes:

[ 04-02-2006, 09:28 PM: Message edited by: Katherine ]

Cuyahoga Chuck
04-03-2006, 01:17 AM
What a crew! Michiganders is going down the economic toilet and you folks are doing a geography project trying to find Bloomfield Hills and it's country club.
Ya' gotta show more noblesse.
If the a bunch of Bloomfield Hills folks start jumping from the upper floors of the Fisher Bldg.,then the place is worthy of discussion.

Charlie

Meerkat
04-03-2006, 03:40 AM
Way to go Republicans and "free trade!"

That sucking sound you hear is the unemployed pulling the country into depression.

:eek:

BrianW
04-03-2006, 03:52 AM
Meer,

If nothing else, your consistant. ;)

Meerkat
04-03-2006, 04:12 AM
Originally posted by BrianW:
Meer,

If nothing else, your consistant. ;) Also, alas, correct. :( :eek: