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Village Files Foreclosure Suit on Radisson Hotel

Since May it's been rumored that the village would foreclose on the hotel, on Friday they officially filed a suit with the Waukesha County Circuit Court. The hotel will continue to conduct business as usual during the foreclosure proceedings.

Foreclosure of the Radisson Hotel has been tumbling around in the rumor mill for several weeks in Menomonee Falls, and on Friday the village confirmed those rumors to be fact.

The village on Friday filed an amended complaint in the Waukesha County Circuit Court seeking foreclosure of the village’s mortgage on the hotel, according to a statement from Randall Crocker, an attorney with the village.

As the primary lender for the hotel, the village holds the mortgage on the property.

The complaint also names additional defendants who hold subordinate loans on the Radisson property. The complaint names the five co-owners and spouses of hotel's ownership group Lodging Investors of Menomonee Falls.

The action was taken by the village to offer a clear title to any purchaser and a subsequent sale of the property in order to recover a principal amout of  $14.4 million in prinicipal funds advanced by the village as well as an undisclosed amount of interest and other costs.

“This foreclosure action is necessary to protect the financial interests of the Village in the property,” Crocker stated. “This foreclosure is not the result of any action or inaction by the Village.”

The village is pursuing all property and collateral from the five members of the ownership group in order to satisfy the outstanding debt owed to the village. All the property would be sold during at a sheriff's sale, and the proceeds would pay the sum owed to the village.

Court records show that David Gilbert, who is one of the five owners, set up a Nevada irreovcable trust in March 2010, which was one month before the village approved a $17.65 million loan for the hotel.

Patch was planning to foreclose on the hotel; however, village leaders wouldn’t comment on the pending foreclosure. A status conference regarding the foreclosure suit is scheduled at 2:30 p.m. Sept. 24 in room C295 of the Waukesha County Courthouse.

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During the foreclosure proceedings, the hotel will continue to operate normally. It will also operate under the supervision of a court-ordered receiver, which the . Under the receiver, the hotel’s operations have stabilized and it will maintain its commitments to customers, Crocker said. The hotel, banquet facilities, and restaurant will all remain open.

“The Village has a strong vested interest in having the hotel succeed in that location, and considers it an important component of the future success of Main Street,” Crocker stated.

Over the past two years Lodging Investors has been the center of controversy ever since owners failed to make the first two payments on a $17.65 million loan issued by the village to kicks start the development.

Lodging Investors failed to make two $700,000 payments on the loan, and things went further south from there. For the past month, contractors who built the hotel have been for the work they completed on the hotel. Barry Bloom, a manager with A1 Services, said the company is owed $70,000.

Bloom has organized other contractors around Wisconsin who were also bilked of payments, and they have appeared at the past three Village Board meetings demanding answers. However, on the Radisson proceedings. Contractors plan to appear again Monday at the Village Board meeting. Bloom estimates that the laundry list of contractors is owed more than $600,000 combined.

Last week, principal hotel owner Jim Heyden on the hotel’s property. According to court documents, there was concern that Heyden may attempt to liquidate assets. Court records also indicate that an unknown Radisson official drained bank accounts for the Radisson.

The Waukesha County District Attorney planned to determine if the money for contractors was escrowed.

Schimel met with village leaders, purused the books, and said that the money owed to contractors is there.

“We saw what we needed to look at. I find nothing that forms any basis for a criminal investigation,” Schimel said. “The village has the retainage funds, and they have more than enough to pay subcontractors.”

However, subcontractors aren't getting paid becuase it is the responsibility of the contractor, Gil-Her Ltd., to submit the payment documentation to the village. However, Gil-Her went bankrupt in 2010. Gilbert was a 50 percent owner of Gil-Her construction.

A Dubious History

In April 2010, the village that featured a $17.65 million loan to kickstart the hotel construction. The ownership group included Heyden, Dave 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 preemptive 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."

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.

Steve ® June 15, 2012 at 08:52 PM
One day closer until I get my free room!
Pj June 15, 2012 at 09:00 PM
The board better start commenting or they should foot the bill for it!
Jann June 16, 2012 at 01:37 AM
Great that the village has the retainage funds, but the taxpayers are going to be millions in the hole. I'm not happy and was not from the start with this deal that I had no say in.
MFalls Girl June 16, 2012 at 12:39 PM
I still would like to know how many other loans the Village has made have not been paid back. Even the smaller loans. HOw many businesses have started up in the Village center and then closed after a year or two.
Jann June 16, 2012 at 02:03 PM
http://www.jsonline.com/blogs/business/159205755.html#!page=1&pageSize=10&sort=newestfirst According to this article from JSonline the hotel is assessed at 8.4 million. Are you telling me that the village loaned them 18 million and they built a hotel that's only worth 8.4? And yes MF Girl, I'd also like to know how much money has been given as grants to businesses. They gave grants to spruce up the outside of properties. I could use such a grant to and maybe get some new windows or something for my house. Nice deal.
Jefferson E. Davis June 16, 2012 at 03:46 PM
Jann: The hotel is listed on the Waukesha County Treasurer's website (http://tax.waukeshacounty.gov/DisplayTax.aspx) as being worth approximately $2.3 million with an address of N88 W14750 Main Street and a Tax Key Number of 0008993. It was listed at $1.8 million as an empty hotel before the $18,000,000 loan. Not sure where or how JS Online thinks it's worth $8.4 million. Remember, according to Village Records, $4,000,000 of the $18,000,000 was used to pay off outstanding loans on the hotel to 3 different banks, advance the now bankrupt Gil-Her Construction $1,006,000 and pay Radisson and Professional Hospitality their "fees". The bottom line is we are all hotel owners now and the community needs to keep a much closer eye on what the Village Manager, Village Attorney and Village Board are doing to the Falls at the taxpayer's expense. This is going to cost a lot of money for the average homeowner when the new tax bills are printed the first week of December each year. $18,000,000 is what the entire tax levy is for one year to operate the entire Village. The bond is due in May of 2014 and will have to be spread out over at least 20 years to lessen the impact on the property tax bill.
W . Benz March 12, 2013 at 02:22 PM
Collateral :: Snowmobiles- Old cars - Time share -. "Due Diligence " MALFEASANCE

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