Iceland investor wants receiver to complete Staybridge project

An Icelandic firm is asking a Milwaukee County judge to appoint a receiver to complete the suspended Staybridge Suites development in downtown Milwaukee.

Reykjavik, Iceland-based SJ Properties Suites BuyCo EHF, an investor in the Staybridge Suites development in downtown Milwaukee, is asking a Milwaukee County Circuit Court Judge to appoint a receiver to take over and complete the long delayed development.

According to court documents, SJ Properties is asking the judge to appoint Seth Dizard of Milwaukee-based O’Neil, Cannon, Hollman DeJong S.C. as the receiver.

The developers for the project are Fort Myers, Fla.-based Development Opportunity Corp. (DOC) and Park Ridge, Ill.-based Economou Partners LLC, which together with SJ Properties Suites BuyCo formed DOC Milwaukee LP for their Milwaukee development.

The development is a 14-story mixed use building at the southeast corner of Water Street and Juneau Avenue. Construction of the building was halted months ago. The building was to have a 117-room Staybridge Suites hotel, 34 apartments and first floor retail space. So far the only tenant occupying the building is a Qdoba Mexican Grill restaurant.

SJ Properties Suites BuyCo and its advisor, Reykjavik, Iceland-based Askar Capital EHF, provided $17.4 million for the project, according to its court document filing.

According to its request for a receiver, SJ Properties Suties BuyCo formed its partnership for the Milwaukee project with Development Opportunity Corp. and Economou in November of 2006.

Two years later Economou replaced DOC as the general partner of the development because DOC was having financial problems with other projects and was unable to provide additional funds for the Milwaukee project and Economou also became insolvent in late 2008, according to SJ Properties court filing.

SJ Properties says it took action in April to terminate Economou and DOC from the partnership.

SJ Properties filed a lawsuit in U.S. District Court alleging that Economou and DOC misappropriated funds for the Milwaukee project and used those funds for other projects.

In addition, 14 subcontractors have filed a total of $3.45 million in construction liens against the project for work that they say they did on the building and were not paid for. Those subcontractors are: Uihlein Electric Company Inc., which says it is owed $685,580; Black Diamond Group, $23,712; Otis Elevator Company, $191,005; Spancrete Industries Inc., $426,743; Superior Masonry Builders Inc., $27,847; Commercial Walls and Ceilings, $543,682; Rankin Inc., $16,737; VJS Construction Services Inc., $411,936; C.W. Purpero Inc., $78,580; Lippert Tile Co. Inc., $165,556; Freedom Fire Protection LLC, $69,721; Langer Roofing & Sheet Metal Inc., $57,514; Klein-Dickert Milwaukee Inc., $625,810; Thomas A. Mason Co. Inc., $129,460.

The lender for the development is Specialty Finance Group LLC, a subsidiary of Atlanta-based Silverton Bank. In its court filing, SJ Properties says the bank advanced $13.4 million for the development but has not fully funded its construction loan.

Adding even more problems for the Milwaukee development, Silverton Bank in May went into an FDIC receivership. According to an Associated Press report the bank suffered large losses on real estate construction and development loans. Recently, federal regulators abandoned efforts to sell Silverton Bank to investors and instead the FDIC plans to sell the bank’s component pieces.

SJ Properties says it, Askar and Specialty Finance Group are the only parties that have advanced capital or construction loans for the development.

Appointing a receiver could finally revive the Milwaukee development.

According to its filing, "Askar and (SJ Properties Suites) BuyCo may be willing to advance some additional funds for completion (of the project), and have found a potential partner for completion. Askar and BuyCo are willing to provide financing for this receivership and stabilize it to maximize its value…Askar and BuyCo are unwilling to complete construction, borrow additional funds, or find a suitable partner for completion until the Milwaukee project has been stabilized."

Judge Mel Flanagan will consider the request for a receiver on June 30.

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