Village Files Foreclosure Suit on Radisson Hotel

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.