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Frustrated Radisson Hotel Contractors Ask, 'Where's Our Money?'

More than one year after the hotel opened in downtown Menomonee Falls, many contractors say they have yet to be paid for their work — and they're looking for answers.

Menomonee Falls' new Radisson Hotel has been the target of a fair share of controversy in just its first year in business.

However, those troubles may be getting deeper.

Numerous subcontractors have gone to court because they claim they are owed more than $3 million for work they've done and haven't been paid for.

The uncertainty surrounding the hotel’s future has a group of subcontractors — who built the hotel and are still owed money — deeply concerned and frustrated.

And the failure to get paid for work completed more than a year ago has placed financial strain on a laundry list of contractors still awaiting payment more than a year after completing their work.

Harry Mattox, commercial division manager with Horner Plumbing in Pewaukee, said the company contracted a $469,000 project with the ownership group for the hotel’s plumbing. The company is still owed $80,000 for the work, which was completed in June 2011.

Mattox said Horner stood to profit roughly $10,000 from the project after labor and material costs. Without the $80,000, the company stands to absorb a net loss of $70,000 for its work, which is a big blow in an industry where many contractors are bidding projects “at-cost” simply to keep their workers employed.

“This has a huge impact on our business. In this market, we are working on 1 to 3 percent margins, if we are lucky,” Mattox said. “It’s upsetting, because we are providing work for a fair amount of guys and doing our best to keep things going in the market. How do you think it would be if we didn’t pay our guys or materials providers?”

Regardless of whether contractors receive their due payments from the hotel’s ownership group, they each still must find a way pay suppliers for materials — often within 30 days.

Menomonee Falls resident Thomas Malzewski owns Heritage Glass in Milwaukee and installed the exterior and some interior glasswork at the hotel. He said his company is still owed $57,000 after completing the contracted work nearly a year ago. He’s had to borrow money in order pay his suppliers, and is eating a $3,600 interest payment on that borrowed debt.

“I need a reason why they’re holding this money. There’s no reason for it. The village is paying the bill,” Malzewski said. “The money is supposedly there, but I don’t understand why they would want to risk putting me out of business, and for what reason?”

Is foreclosure on the horizon?

The problems with the unpaid contractors may not be the only issue facing the Radisson.

An email obtained by Patch indicates that village officials may be discussing foreclosure on the hotel, which opened in May 2011. In the May 2 email, David Frank, the attorney handling litigation revolving around the Radisson says:

"At this point all we know if (sic) that the Village intends to proceed with the foreclosure. We are awaiting its next move."

Frank and Village Manager Mark Fitzgerald declined to comment on the Radisson due to ongoing litigation involving its receivership.

The to oversee the daily operations of the hotel after the Radisson ownership group missed its first payment on a $17.65 million loan.

Despite the controversy circulating the hotel, that he remains confident in the future of the hotel, and that day-to-day operations were unaffected. Gaab could not immediately be reached for comment on Wednesday.

Owner says there is money for contractors

Jim Heyden, one of the members in the ownership group, Lodging Investors of Menomonee Falls,  that funds have always been available to pay contractors despite the group’s failure to make its first payment on the principal. He said the funds have been sitting in an escrow fund.

“We are aware that the hotel has some contractors that should be paid, and others that were not based on completion and quality of work,” Heyden said Tuesday. “There are certain things that need to be worked out.”

Heyden said he planned to address some of those concerns in the next week, but deferred further comment on the status of contractor payments and foreclosure to Frank.

Although Heyden claims the funds have always been there, subcontractors have yet to see those payments. Some of those contractors are also receiving mixed messages from the village in terms of when those payments may come to fruition.

“We were told by the village that the funds were there and were just escrowed. Then we were told the village was requiring a third party, or receiver, to review all their paperwork,” said Barry Bloom, manager of A1 Services in Milwaukee, which Bloom says is still owed $70,000 for electrical work.

“Every signal sent to us from the village was not to worry, but now here we are all sitting here holding the bucket,” Bloom said.

Bloom said his company was required to submit the necessary paperwork to the to a village attorney several times. Bloom said he stopped hearing from village officials in March regarding information about when the village would draw funds to pay the bill.

“For our business, it has put us in a real cash flow pinch. This money is counted upon to put us into our next operating year,” Bloom said. “Village has been stalwart; they won’t talk. Period. The attorney for the ownership group is giving us different stories. We know that this may not end pretty, but we don’t have anything to lose because we aren’t getting any answers.”

According to Waukesha County Circuit Court records, the following businesses have filed construction liens against Lodging Investors:

  • Gil-Her Ltd, $2,775,483
  • Don Stevens, Inc., $15,054
  • Horner Plumbing, $80,337
  • Gypsum Supply Co., $24,668, although $13,395 has been paid.
  • NIC Meyer Construction, $27,996, although $3,502 has been paid.

The total dollar amount from Gil-Her Ltd. is inflated due to the fact that numerous other subcontractors worked beneath the auspices of the now defunct Sun Prairie-based firm. However, hotel minority owner Dave Gilbert was also part-owner in Gil-Her, which went out of business after Gilbert filed for bankruptcy in 2010.

Bloom says the list of subcontractors wanting to get paid is longer than what shows up in court records.

Brian Miles owns a two-person exterior insulation finish systems business, and says he is owed $11,000. That might not seem like a lot, but for a small operation like his, waiting on those funds has been nearly devastating.

“It’s going to take more money out of our pockets every month until it’s paid off and it will create a hardship on my business and my family,” Miles said. “It’s very frustrating, especially because I get call once a week from my suppliers asking where their money is. All I can do is tell them it will come next month. What are we going to do? How are we going to pay this off?”

A Troubled Past

In April 2010, the village that featured a $17.65 million loan to kickstart the hotel construction. The ownership group included Heyden, Gilbert, Dean Grosskopf, Paul Nooyen and William Krueger.

However, things quickly went south after the village approved the loan. In October 2010, Gilbert, who was a 10 percent owner of the hotel, filed for Chapter 7 bankruptcy. According to documents from the U.S. Western District Court, Gilbert’s assets were worth some $3.3 million but had outstanding liabilities of $106.4 million.

That was just months after Gilbert provided necessary documentation to ensure he had necessary net worth to account for his portion of the hotel’s worth.

Then, Grosskopf’s hotel management firm, Professional Hospitality, became in Dane County Circuit Court. According to the suit, Madison investor, Gregg Raup, is accusing Professional Hospitality of wrongfully diverting $1.2 million from hotels in Beloit and Green Bay to the Radisson Hotel in Menomonee Falls.

That spurred the village to take preemtive action and appoint a receiver to monitor day-to-day operations at the hotel and its revenues in November. At the time, Fitzgerald said officials were concerned but optimistic.

"The Village Board of Trustees is certainly concerned about recent events involving the Menomonee Falls Radisson Hotel and the outside litigation that is pending against current owners," Fitzgerald said in a statement at the time. "However, the Village Board of Trustees believes that the appointment of a receiver is a prudent measure to take to assure the community and its citizens that the hotel’s operations will be legally protected during this period of outside litigation."

As part of the developer agreement crafted by the village, the hotel’s ownership group was required to make scheduled payments on the principal of the loan. However, the group failed to make its first $700,000 payment when it came due in November. A total of $4.1 million in principal is due to be paid by the partners over the next four years. According to the development agreement, the loan will be paid in full by the time the calendar turns to 2026.

Nuitari (Grand Master Editor) May 09, 2012 at 10:09 PM
If I wasn't so hard on my luck, I'd take it off their hands and turn it into a casino.
Craig May 09, 2012 at 10:14 PM
MF Village board should stick to what they know best; and leave lending to the lending institutions, which is what they do best. I feel the pain the contractors are suffering, as a MF taxpayer I too got screwed by this group. I blame the Village Board. Several years ago the Village Board didn't want to take a risk on the same building when another developer asked for help. If my memory serves me correctly, they felt $2 Million was too big of a risk. Yet they agree to loan nearly $18 Million to people who were deemed not credit worthy by Banks AND the Radisson Corp?! This reeks to high heaven.
Steve ® May 09, 2012 at 10:29 PM
We need some Obama bucks
Nuitari (Grand Master Editor) May 09, 2012 at 11:11 PM
A friend of mine by the name of Nate would say that we should bomb this place before its repo'd and gets turned into low-income housing for "our neighbors."
Jann May 09, 2012 at 11:31 PM
The problems are just going to continue in the Falls. One TIF after another. Leave a little green space until it makes sense to develop something. We have so many vacant businesses right now and it is growing. Fitzgerald will be retired and moved out of here when it all hits the fan and the Falls tax bills. Cut it out please.
Nuitari (Grand Master Editor) May 10, 2012 at 12:01 AM
Sort of like Johnny-Zero-Norquist
Nuitari (Grand Master Editor) May 10, 2012 at 12:03 AM
At least they've almost paid off the drywall, so they can't repo that. Might want to make the minimum payments on that $2.8 million bill.
Russell May 10, 2012 at 11:20 PM
I blame the general manager, who after meeting him, is a frickin' dope. He's run this hotel in the ground and they need to replace him.
paul May 12, 2012 at 05:54 AM
With my taxes on the line for this project I'm doing what we all should do. Support the hotel and. restaurant. I had family intown for a funeral and they all stayed Radisson. The rooms are gorgeous.. the staff was friendly and caring. The restaurant was great! My whole family had the prime rib. The experience was great, and with the stress of why we were all there me and my family were awe on how fantastic everyone was. The only shot we have to get our tax dollars back is to support this hotel, restaurant and employees.
Lori May 12, 2012 at 07:24 PM
Remember the management and employees have NOTHING to do with the issues between the owners and the village.They are just trying to make a living and help make the hotel a success. It's only fair that the project is given a chance to be successful.
Nuitari (Grand Master Editor) May 12, 2012 at 08:02 PM
Some of you may have forgotten the history of this building...... Days Inn - FAIL Holiday Inn - FAIL Falls Inn - FAIL Radisson - EPIC FAIL Keep doing "A" and expecting "B", idiot developers. Thanks village board for gambling with our taxes, all in the name of jobs.
Bob mercy June 16, 2012 at 12:10 AM
Lets layoff more village employees.The hotel employees can plow streets,fix water breaks,prevent sewer backups and fix the streets.We will be paying them anyway.Or lets get rid of the village mananger the brain of this project and the village board who approved it. Get your shovels out falls residents.You will have to do the work yourself, we have to pay for the hotel somehow.
Craig June 18, 2012 at 02:34 AM
Gaylord: Actually I see it slightly differently, but I think we agree on the outcome. You feel the taxpayer bent over backward, and I feel the taxpayer was bent over forward -like a troubled youth in the Penn State locker room.
walk the talk July 01, 2012 at 02:57 PM
As a former business owner in the Falls whose business is now located in Germantown I am sickened by the actions of Menomonee Falls board of directors. We are a successful business of over 20 years and went to the Village board for some help with relocation and financing for a short term TIFF loan for only about $50,000.00, peanuts, and were practically laughed out of the Village Hall. Comments like "we are not on business to help you but Good Luck " were what we got while they were lending my tax dollars to a predicitable failure..Am I pissed???YOU BET If this wasn't so serious it would almost be laughable. Again the joke is on the citizens who chose to live here and then found out just how irresponsible our government in this little village really is, and how really unimportant our tax money and opinions really are. No wonder this country is in such dire straits. Remember this when you vote next time. Recall Walker who is actuallly doing wnat he was elected to do, funny . We started at the wrong place.
walk the talk July 01, 2012 at 03:02 PM
Way to go Steve. He just loves a good bailout...also some of the people he helps in high places end up in jail. I see this as a win win
walk the talk July 01, 2012 at 03:07 PM
Way to go Steve. Some of the people involved in receiving the bail outs from him seem to end up in jail I see this as a win win.
Steven Farrell August 03, 2012 at 06:28 PM
The people on the Village Board that approved this, should be held accountable, before anyone bails out! Let them risk their own money. Of course they would never do that because it's a bad deal. There is a Raddison 5 miles away, just off of North Ave. Who would want to come to this ghost town? They keep operating like this, there will be no bussineses left in our town. I really wonder who got all the money they spent on this, seeing as they wont't pay anyone? These are the guy's that shouldn't get paid! FIRE THESE IDIOTS and hold an investigation!
Steven Farrell August 03, 2012 at 07:42 PM
Hey Firefly: I'm not worried. Cut off the horn and the RINO's are just another useless political animal!
W . Benz March 20, 2013 at 07:00 PM
Yep :: Fire these idiots

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