Hotel Northland developers accused of defaults on loan agreement
GREEN BAY (WLUK) -- FOX 11 has obtained three letters the former bank for the Hotel Northland project sent to city officials, accusing the developers of defaulting on their loan agreement.
Mayor Jim Schmitt and Northland officials have claimed the $44 million project lost its senior lender because the original bank was purchased by another bank that does not deal with hotel projects.
“There is a real rats nest here,” said Guy Zima, a Green Bay alderman.
Zima isn't buying the mayor or the developers’ explanation after receiving the three letters Council President Tom DeWane obtained from the city attorney's office.
All three letters are from FirstMerit Bank or The Huntington National Bank, the project's former senior lenders. The letters are addressed to the Hotel Northland developers. The letters also list The City of Green Bay in its carbon copy.
Huntington purchased FirstMerit Bank, which was the original lender.
The first letter, dated May 5th of last year, reads in part, “Please be advised that an Event of Default has occurred and is continuing under the Loan Agreement as a consequence of Borrower having failed to make any payments into the reserve fund.”
The second letter, dated September 2nd, accuses the developer of four defaults. It says the “Lender hereby demands that the Borrower cure the following Events of Default to the satisfaction of the Lender within 30 days from today.”
And the final letter, dated November 3rd, says it is a “notice of failure to timely cure defaults.”
The final letter goes on to say the lender exercises its equitable and legal rights to refrain from funding the loan and to refrain from participating in the project any further
“Why would we be shelling out more money to people who can't meet their obligations to the bank?” said Zima.
While Hotel Northland developers say renovation work is 72 percent complete, they admit payments to construction crews have not kept pace, slowing down the project.
Zima says the bank letters and the information in them were not shared with the city's Redevelopment Authority earlier this month. That's when the Northland developers asked for a $500,000 bridge loan to allow the project work to continue while finding a new senior lender.
FOX 11 asked Green Bay Mayor Jim Schmitt why he or any other city staff did not share the bank letters with the Redevelopment Authority.
“That was Northland's decision to separate and Huntington’s decision to sever the deal,” said Schmitt. “They were up here in Green Bay. The city was well aware of what was going on.”
“None of that information was shared with the RDA, not even close,” said Alderman Joe Moore, who is a member of the Redevelopment Authority.
Moore is one of two RDA members FOX 11 spoke with that said city officials never shared the bank letters.
“I don't think there is going to be too many people real happy that this information wasn't shared, especially when it goes back to as far as May,” said Moore.
FOX 11 called the PR firm representing the Hotel Northland developers for comment. It sent a statement reading, “The ownership of Hotel Northland is disappointed that FirstMerit and Huntington failed to honor its loan commitment to the development team and our junior lenders. We are working with our shareholders to overcome this and expect to do so.”
“They have two senior lenders lined up, so that tells you that they do have the ability, the model does work, the project does cash flow,” said Schmitt.
Neither Mayor Schmitt nor Hotel Northland would say who those new senior lenders might be, or whether a new deal has been finalized.
The city council is expected to decide next month whether it will borrow the additional $500,000 for the project that the RDA has recommended.