Monday, August 19, 2019

Oshkosh arena developer files for bankruptcy, blocking receivership with moments to spare before hearing

The developer of the Menominee Nation Arena has struggled to raise capital for the project.
By Miles Maguire
With moments to spare, the developer of the Menominee Nation Arena filed for Chapter 11 bankruptcy Monday afternoon, blocking the effort of the general contractor to seize control of the building.

The contractor had hoped to have Paul G. Swanson, an Oshkosh attorney who specializes in bankruptcies and restructurings, appointed receiver of Fox Valley Pro Basketball Inc. and given responsibility for taking possession of and selling the arena.

The motion to appoint Swanson was before Judge John A. Jorgensen, who said he was unable to act on it because of the federal bankruptcy case. Jorgensen said he had received the notice of the filing about an hour before the receivership hearing was scheduled to begin.

“Federal law requires a stay of all proceedings,” Jorgensen said. “At this point, this action will be stayed. Nothing will be scheduled until we hear further from the plaintiffs.”

In the Chapter 11 bankruptcy filing, Fox Valley said it had 100 to 199 creditors as well as both assets and liabilities in the $10 million to $50 million range. The case has been brought in U.S. Bankruptcy Court for the Eastern District of Wisconsin, which is based in Milwaukee.

In a Chapter 11 bankruptcy case, the debtor is given breathing room to reorganize its financial affairs. In this case, the developer holds an asset, the arena, that is worth roughly $20 million while facing claims of roughly $13 million. The claim amount could rise, however, if more creditors come forward.

The receivership motion had been drafted on behalf of Bayland Buildings Inc., the Green Bay company that served as general contractor for the construction of the arena and that says it is still owed $13.2 million for the job.

If it had been approved, the receiver would have been given authority to take over the arena and to “sell any and all property of Fox Valley Pro Basketball free and clear of all liens.”

Fox Valley did not send a representative to the hearing, but a notice of the bankruptcy case was filed in Winnebago County Circuit Court.

Bayland is the plaintiff in one of three lawsuits filed this month against Fox Valley, which built the arena and was instrumental in getting the Milwaukee Bucks to locate its minor league affiliate, the Wisconsin Herd, in Oshkosh. 

The other lawsuits were filed by Fox Valley’s former law firm, Caliber Law, and by a local businessman, Eric Hoopman, who was one of the local investors in the arena. Caliber says it is owed $97,000 while Hoopman is seeking payment of $1.1 million.

The Bayland and Caliber lawsuits also name Gregory B. Pierce, the president of Fox Valley and of a local investment company, Windward Wealth Strategies Inc. He issued personal guarantees for the missed payments, court papers say.

The arena, at 1212 S. Main St., opened in December 2017 at a derelict industrial site that had been the home of Buckstaff Co.’s furniture factory.

The parcel, which is still owned by the city and leased to Fox Valley, is currently valued at $17.7 million, according to the city assessor’s website. The actual cost of construction at the site, according to Bayland’s lawsuit, was much higher: $21.5 million.

During construction costs rose as soil conditions were found to be worse than expected and changes were made to the original development plan. 

When Fox Valley ran into trouble financing the project, Bayland agreed to take a mortgage on the site to cover the outstanding bills on a temporary basis while Fox Valley looked for a long-term loan.

At the beginning of the project, Fox Valley agreed to pay for $2.5 million in public infrastructure improvements to move construction along. In turn the city agreed to reimburse it for this expense as well as an extra $3 million for environmental remediation through a process called tax incremental financing. 

None of this money has been paid back to the developer, and the first installment, about $430,000, would not have been paid until November. The total was capped at $5.5 million.

Fox Valley had hoped to take the promise of incentive payments from the city to the financial markets and sell it for an upfront transfer of $4 million. According to legal documents, Fox Valley would have used this money to reduce the amount it owed Bayland and then gone after a conventional mortgage to cover the rest. 

Lingering environmental concerns delayed the process of obtaining financing for the project. 

In addition, Bayland's lawsuit says, Fox Valley is in default “of the development agreement with the city of Oshkosh, its obligations to the Milwaukee Bucks LLC and its obligations to other creditors."

According to the lawsuit, Fox Valley and Pierce “have provided creditors and investors with false financial information in an attempt to raise capital.”

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