NEW ULM Due to Marktplatz Mall's ongoing legal war, Archery Trade Association will move out of the mall next Tuesday.
Archery, an international organization of archery and bow-hunting businesses, runs its communication headquarters in the southern side of the mall. Archery organizes its major operations, including national trade shows, out of the office.
Archery CEO Jay McAninch said the decision was based on his need to have guaranteed access to his offices. The City of New Ulm has threatened to shut off utilities to mall this month over $4,000 owed in utilities on the northern end of the mall. It has sent similar notices in the last two months. If the utilities are discontinued, city and state regulations will force the mall to be closed.
Staff photo by Josh Moniz
Archery Trade Association CEO Jay McAninch said the legal battle over Marktplatz Mall and the question of whether a utilities shutoff will close the mall has been too distruptive to his business. He plans to move his business out of the southern portion of the mall and into a smaller building in New Ulm. He said he’s never encountered a situation like this in his 30 years of business.
McAninch said the shutdown threat has been too disruptive to business, so he decided to move to the former Ameriprise Financial building at 117 S. Valley Street.
The mall has two owners: Randy Danielson, who owns the southern third of the mall, and New Ulm Retail and Development, LLC (NURD), which owns the northern two-thirds of the mall. Danielson also owns the first mortgage on NURD's portion of the mall.
Danielson has pledged to pay all the outstanding utilities, and has paid the utilities in the last two months. McAninch said he is aware of Danielson pledge, but feels he needs more certainty.
"We can't afford any unplanned closures. I can't risk Danielson getting mad enough he doesn't pay the bill or him becoming unable to for some reason, "said McAninch.
McAninch said Danielson has been problematic on some things, such as fixing the elevator that broke in May, but he said Danielson was still an overall positive landlord.
He said he is dedicated to staying in New Ulm, the town he loves, but significant offers from Mankato and the smaller size of the new location make the decision difficult. He estimates it will take $5,000 to move equipment and significant work to adjust the new location to their needs. He said the ordeal has prevented him from hiring more employees.
"It's a real shame, because we have had to hold off hiring at least two people over this," said McAninch. "In my 30 years of business, I've never experienced something like this."
Danielson denied any responsibility for Archery's move. He claimed Brown County's tax forfeiture filing last June for years of unpaid property taxes disrupted a lease renewal deal. The county is currently processing the return of Danielson's mall property because he has paid the due taxes and the county is uncertain it filed at the correct time. Danielson also blamed the City of New Ulm for being unwilling to sign NURD's utilities over to him, which would allow him to pay them in response to the city sent shutoff notices.
The utilities are just part of the dispute between Danielson and NURD, which is run by real estate professionals Mike Strand and Cliff Strand, of California, and Lance Warner, of Ohio. Their dispute has ranged over two bankruptcy filings and a NURD currently active lawsuit against Danielson in Brown County court.
It originated sometime between August and September 2010 when NURD's current owners sold control of NURD to real estate businessman Ty Kirkpatrick. By Dec. 27, 2010, American Bank of St. Paul, which owned the first mortgage on NURD's side of the mall at that time, foreclosed on the property. It demanded the entire mortgage balance, for default in payments and because of a mortgage provision that allowed it to demand the entire amount if the mortgage property or its ownership entity was sold. NURD claims Kirkpatrick's mismanagement caused the foreclosure, but mortgage payments stopped in June 2010 and many details remain murky.
Danielson purchased the $725,000 mortgage before American Bank sold the property, put the mortgage on indefinite hold and began collecting all the mall rental payments under his new Assignment of Rents. In the following months, NURD's current owners purchased NURD back from Kirkpatrick.
An Assignment of Rents is a legal document used to further secure mortgages by giving the mortgage holder the right to take over rent payments and directly apply those funds. It is mainly used to cure defaults and similar problems. Danielson is given the right to collect the rents even if default did not exist. It states he is not obligated to pay expense such as utilities, unless he wishes to, but he is obligated to put all unused funds towards the mortgage debt.
NURD claims Danielson has failed to provide full accounting of the rents he has taken, alleging he used them for personal expenses. Danielson denies the charges. He has not yet submitted any official accounting in any of the related litigation.
Danielson claims NURD has orchestrated a campaign of intimidation to try to force him to sell at their asking price and relinquish control of the rents. He points to NURD building a wall, filing and taking items from the office they had let him use while simultaneously filing legal action before prior action is even completed. He also claims NURD syphons off all mall revenues it obtains to unknown accounts, pointing to a NURD July 2011 letter.
The letter, sent by NURD's lawyer at the time, told the northern portion tenants they were required to direct their payments to Cliff Strand. Danielson had an active Assignment at the time. Several tenants have confirmed they sent payments to NURD in the following months. No official accounting of the rents has yet been filed in the related litigation.
These disagreements led to NURD claiming Danielson must pay the utilities as rent collector, while Danielson claims he is not obligated but will make payments to keep the mall open.
New Problems and
NURD now claims Brown County owes it money for Danielson's share of the mall's insurance payments, since it currently owns his portion due to the cancelled tax forfeiture filing and is unable to return ownership until at least next week. County officials claim Danielson is responsible to pay since he is still effectively managing his side.
Danielson and NURD have also filed their schedules in their Brown County lawsuit, setting a trial date for July 1, 2013. The judge could order mediation prior to that date.
Danielson claims he will attempt to foreclose on NURD within two weeks with the first mortgage, which is due at this point. NURD said it will counter-file, demanding exact mortgage totals.
A third party with some connection to NURD has stated interest in purchasing the entire mall, claiming it is willing to pay Danielson $1.4 million for his property and mortgage. Danielson claims he hasn't seen sufficient paperwork to believe the deal legitimate yet.
Beyond that, NURD and Danielson operate under an Operating Agreement, which determines how costs are shared. It dictates that all problems not resolved in 30 days are supposed to be solved through legally-binding arbitration. If the parties agree to arbitration, the decision would be final.
Josh Moniz can be e-mailed at firstname.lastname@example.org.