It wasn’t a full house at the Menomonee Falls Village Falls Board meeting Monday night, but there are still more questions than answers in the continuing saga of the village’s loan to the owners of the troubled Radisson Hotel.
Attorney Randall Crocker, representing the village in the foreclosure lawsuit against Lodging Investors of Menomonee Falls, answered some of the questions residents had raised during recent meetings involving the use of public funds to finance the troubled project.
Crocker presented a number of facts taken from the court records in the foreclosure suit the village has filed against the owners. He acknowledged the village agreed to provide up to $17.65 million for the redevelopment of the hotel, but as the lender the village is not the owner of the hotel.
“It is not correct to state that the village borrowed $18 million to purchase a hotel worth $8 million,” Crocker said. “The village made a loan. The current outstanding indebtedness is approximately $14.5 million and the value of the hotel, the tax increment and the projected revenue stream should service
However, the loan is secured by a first mortgage on the hotel, so if there is a default the village would own the Radisson, he said.
He said the funds came from a bond anticipation note that included capitalized interest for a portion of the term of the note. But he failed to say to say the village had made the $1 million-plus interest payments to date.
The village has also advanced $176,292 to the Investor Group to purchase a computer and reservation system, pay Radisson franchise fees and $60,000 for employee payroll. The hotel’s court-appointed receiver, Seth Dizard, said the payroll funds will be repaid to the village by the end of August.
Crocker said the village has no contract obligations to the general contractor or subcontractors and under the terms of the loan agreement, the village doesn’t have to provide additional funds to the hotel owners to pay the contractor liens. He added there was no escrow account set aside for the payment of
However, former Village President Jefferson Davis showed a village-produced document that showed when contractors sought draws during the building process, more than $1 million was set aside from the draws for an escrow. There was no explanation as to where that money went.
Crocker explained that due to the foreclosure action, there were now negotiations for the “review and possible payment of outstanding contractor invoices assuming various terms” that would protect “the rights and interest of the Village.”
And Crocker said despite the troubles at the hotel, the assessed value of the property has increased from $1.8 million to $8.9 million since 2009, and that the full true value has yet to be achieved.
Dizard added that the he oversees all of the hotels accounts, that all payrolls, taxes, franchise fees and other obligations are paid in accordance with their terms and that the hotel is profitable.
Following the meeting, Dizard clarified to a member of the public that the hotel is “paying its day to day obligations,” which led the unnamed citizen to say the hotel has positive cash flow, but not truly profitable.
Mark Mouradian, a subcontractor employed with Edward Don, is hopeful that he will see all of the $80,000 owed his firm will be recovered. He is optimistic now that information is being made public because until now there has been no conversation between any of the parties.
Davis was not convinced by village's presentation. He claimed that members of the investor group overstated their personal financial statuses, had bogus phone and addresses and moved assets to Nevada to avoid losing them in any
Village President Randy Newman said he didn’t know how deep the board went into vetting the investor’s financials, instead directing questions to Village Manager Mark Fitzgerald.
Newman said he was happy to finally get some of the information out to the public and hoped that some of the financial information involved in the deal could be shared with the public. However, due to the proprietary nature of the business, much of that information may remain private due to competitive concerns.