NEW ULM - The Marktplatz Mall could have its power shut off next Tuesday and its stores thrown into chaos if its utility bills are not paid. This development comes just as Randy Danielson is poised to regain control of George's Ballroom and his half of the mall from tax forfeiture proceedings.
The City of New Ulm is threatening to shut off the mall's electricity and water because of $4,000 in utility bills owed on the northern half of the mall. The portion being billed also includes the mall's hallways, common area and Exit lights.
Staff photo by Steve Muscatello
Unpaid utility bills threatened a power shutoff at Marktplatz Mall.
New Ulm Retail and Development, LLC. (NURD) owns the northern half of the mall. NURD is owned by three real estate professionals: Lance Warner, of Sandusky, Ohio, and the father-son team of Cliff and Mike Strand, of Irvine, Calif.
The City says the $4,000 is the last portion of a larger utilities bill owed by NURD.
In December 2011, NURD and SEK Financial, LLC., which is run by Danielson and owns the southern half of the mall, were in a legal dispute over who would gain final control of the mall. SEK owns the first mortgage on NURD's mall portion, which it bought when the mortgage went into foreclosure in February 2011. Later negotiations between the sides went sour, and Danielson threatened to foreclose on NURD and the first mortgage. NURD defensively filed bankruptcy to gain legal protections. Minneapolis courts dismissed the filing and determined the sides should figure out their own compromise. But, NURD received a grace period of protection until last month.
The City of New Ulm says $9,200 in utility bills was owed prior to NURD's bankruptcy and the associated protections. This May, the Public Utilities Commission brought four liens against NURD and the mall for $19,000 in unpaid utility bills. The liens were aimed at recouping the $9,200 plus about $10,000 in utilities incurred since that time. For June, a regular monthly payment of $3,900 was anticipated.
The City says that all but $4,000 of the $19,000 plus June utilities owed has been paid off since bringing the lien.
City Attorney Hugh Nierengarten said the City's is very serious about shutting off utilities to the mall. He said that dealing with both mall owners has been so frustrating that he will only communicate with them through their legal representation. He said that this would force action and generate records of the actual communications.
If the mall utilities are turned off, City and state regulations will prevent anybody from entering the mall for work. Little Rascals daycare, which hosts 102 kids for 63 families, would be shut down, along with the rest of the internal stores. Herberger's may also be closed, since portions of its store are in the mall.
Accusation against the City
Danielson appeared to end the danger of a mall shutdown Friday by pledging to cover NURD's remaining $4,000. Danielson said he wanted to keep the mall open, but was frustrated since he kept up with his utilities for his mall portion.
However, Cliff and Mike Strand still accused the City of New Ulm of fraud and misdirection in the process of paying off their utility bills. Prior to hearing about Danielson's pledge, both said they would let the mall close down over the dispute.
Mike Strand claims the City only asked for $4,500 in utilities before the bankruptcy filing and that NURD paid a $3,900 down payment under an agreement they worked out with the City.
He claims that the City bumped up the pre-bankruptcy amount to $9,000 in May without providing documentation. He claims the $3,900 deposit isn't being accounted for and that the City has been dodging providing records.
Nierengarten said the City never entered into a payment agreement with NURD prior to the bankruptcy.
To corroborate their claims, NURD only provided The Journal an agreement drawn up by their lawyer that was not signed by a bankruptcy judge to make it official.
NURD and SEK have both agree that a utilities shutoff was threatened last month. They also agree that Danielson paid $4,000 and Herberger's paid $9,000 to keep the mall running. NURD claims to have made a payment, but Danielson disputes it.
NURD also claimed it shouldn't pay the utility bills since Danielson, the first mortgage holder, is collecting the rental payments.
Danielson was granted rights to the rental payments during the forbearance agreement that allowed him to purchase the first mortgage. It also mandated that he provide monthly accountings of the mall finances.
The Strands have accused Danielson of failing to report how he managed the rents and how they were used. They also accuse him of not paying the utilities which would include their portion of the mall.
Danielson claims he has paid utilities on his side. He also said he was collecting the rents and using them for their intended purpose until September 2011.
He claims that NURD provided false documentation showing they had the rights to the rental payments, which is impossible while Danielson is the designated person. He claims they convinced the stores on their side to provide them the rental payments, which disappeared to unknown accounts.
He claims he finally convinced the stores last month to return to providing him the rental payments. NURD has corroborated this statement.
Neither side has provided The Journal proper paperwork to prove their claims outside of the forbearance agreement.
Danielson poised to regain southern half of the mall
In other mall business, Danielson may soon regain ownership of his half of the mall and George's Ballroom from the tax forfeiture proceedings filed by Brown County.
Brown County filed against the two parcels on June 4, stating that Danielson owed a combined total of $61,000 in property taxes. Danielson claimed Brown County was mistaken about the final due date and paid the taxes the next day.
In the Brown County Board's agenda for Tuesday, the Auditor-Treasurer's Office suggests cancelling the forfeiture.
Assistant Auditor-Treasurer Jean Prochniak said that the county was satisfied with receiving the payments it sought and didn't want to get involved in the legal tangles of the mall.
She also said the county feels it followed proper protocol, but it didn't feel completely secure after reviewing Danielson's challenge. She said vagueness in related statutes and a lack of precedence anywhere in Minnesota records for this circumstance also contributed.
Danielson said he feels vindicated by the county's proposal and is not interested in bringoing lawsuits against the county.
Mike Strand said NURD was outraged by the development. He said they had offered to buy Danielson's portion and that the decision set a dangerous precedent for the county. Prochniak said she felt this was a one-of-a-kind case.
If the Board approves ending the forfeiture, the state will begin paperwork for returning full legal ownership to Danielson. The process is anticipated to take at least a month.
Josh Moniz can be e-mailed at firstname.lastname@example.org.