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Attorney says Menomonee Falls will recoup Radisson costs

Radisson operations stable; Falls expects to be paid

July 17, 2012

Menomonee Falls - The Radisson Hotel in Menomonee Falls is stable and the village is anticipated to be paid in full for the money owed, according to Attorney Randy Crocker, the attorney handling litigation for the village.

Crocker made a presentation to the Village Board on Monday night to update the board and public on the Radisson Hotel that has sparked controversy because of a $17,650,000 loan the village provided to Lodging Investors of Menomonee Falls that is yet to be paid. The village is currently owed $14,500,000.

According to the presentation, it is currently anticipated that the money owed to the village will be paid for by the payment obligations of the borrower under the secured financing transaction, the refinance or sale of the hotel and with the tax increment generated by the increased value of the redeveloped hotel and not from the general tax levy.

'Safeguarding the taxpayers'

"These sources will safeguard the taxpayers of the village," Crocker said in a statement he read at the Village Board meeting.

In addition to the loan, the village advanced funds to keep hotel operations afloat. The money was used for payroll, franchise fees and the computer and reservation system totaling $176,292. Crocker said this money will be paid back from hotel operations before the end of August.

Former Menomonee Falls Village Board President Jefferson Davis said although it was a nice presentation, the attitude of most residents in attendance is that they will believe it when they see it. He said the residents will be asking for copies of the checks from the hotel owners as proof that the money "will be paid back in full to the taxpayers.

"The attorneys stated that the hotel has been stabilized and is profitable. What does that mean? The developer's agreement calls for the financial statements of the hotel to be made public and the citizens have a right to know what happened to their $18,000,000," Davis said.

'Hotel is improving financially'

The initial loan is currently in default because Lodging Investors has failed to make the principal loan payments, Crocker said. This includes failure to pay franchise fees, sales taxes and to pay contractors. As part of the foreclosure action the village pursued with the hotel, lawyer Seth Dizard was appointed as a receiver over the hotel. Dizard said the hotel is improving financially.

"The hotel's financial performance is now being closely monitored," Crocker said. "The hotel's financial position is improving. New contracts and other commitments for events and hotel usage have significantly improved the financial operations of the hotel."

Subcontractors still unpaid

For the past four months, a dozen subcontractors who worked on various parts of the hotel have pleaded with the Village Board to provide them answers on when they will be paid for their services.

Crocker said because of the defaults by the borrower and the liens filed by the general contractor and subcontractors against the hotel that exceed the balance remaining on the loan, no further monetary advancements will be made.

"The village has no contractual relationships with the general contractor or the subcontractors," Crocker said. "Pursuant to the terms and conditions of the development agreement and the loan documents, the village has no contractual obligation with Lodging Investors to provide additional funds for payments to the general contractor or subcontractors."

Village not obligated to pay

Escrow accounts or trust accounts, he said, do not exist to pay either the general contractor or subcontractors.

"No additional funding obligations on the part of the village exist," Crocker said.

By foreclosing on the property, he said negotiations are under way, however, to pay the outstanding contractor invoices.

"We are thankful that taxpayers were finally briefed on the status of the hotel after nearly a year of silence by the village manager, village attorney and Village Board," Davis said.

A citizen's public forum on the Radisson Hotel is scheduled from 7 to 9 p.m. July 24 in the Menomonee Falls Library.

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