Bondholders of Vadnais Heights facility unhappy with judge’s ruling.
A judge has cleared the way for Ramsey County to purchase the Vadnais Sports Center for $10.55 million, giving the county a state-of-the-art recreational complex for less than half the price that private investors paid to build it four years ago.
Ramsey County Probate Judge David Higgs on Tuesday approved a request from U.S. Bank, the trustee acting on behalf of those investors, to sell the financially troubled sports center, located in Vadnais Heights, to the county.
The judge’s decision came a day after Higgs heard from a handful of bondholders opposing the sale. Bondholders initially put $26 million into the complex, which includes a 100,000-square-foot domed fieldhouse and two ice rinks.
The sale is expected to proceed under a letter of intent approved by the County Board and signed in March. The targeted closing date is June 30.
“It’s a real exciting moment,” said County Commissioner Blake Huffman, who pointed out that the discounted price will result in a new sports facility that will be self-supporting.
“We’re getting a brand-new facility at pennies on the dollar,” said Huffman, whose district includes Vadnais Heights. “For those who are down on ice rinks, they’ll never pay a bill. It’s definitely a win for the users, and it’s a nonevent for taxpayers.”
The county made a straight-cash bid for the facility, unlike two competing bidders who dropped out after being unable to muster the financing under a deadline set by U.S. Bank.
The money to buy the sports center will be borrowed from a reserve fund the county keeps as part of its normal budgeting process. It will essentially be an internal loan.
The acquisition of the complex, located at County Road E and Hwy. 61 near both the Mounds View and White Bear Lake school districts, represents a marked improvement in the 10 arenas run by the county, Huffman said. It will also help ease demands on ice time needed by hockey teams and figure skating groups, especially following the end of ice operations this year at the Coliseum on the State Fairgrounds.
“I tell you what, our other rinks, they average about 50 years old, and as a group, they’re not in the greatest of shape,” Huffman said. “This takes Ramsey County’s rinks and moves them ahead over a generation.”
The county’s gain, however, comes at a heavy cost to bondholders, who voiced their frustration and anger to Higgs on Monday and in another hearing earlier this month.
The bonds were issued through the Vadnais Heights Economic Development Authority in a “conduit financing” arrangement in which the debt was issued on behalf of a nonprofit organization — Deephaven-based Community Facility Partners. The firm defaulted on the bonds when sports center revenues failed to cover both repayment costs and building operations after the city of Vadnais Heights stopped subsidizing the facility.
Bondholders who opposed the sale argued that U.S. Bank was rushing to dump the complex without giving it a chance to turn a profit. They also argued that their pleas for more information on the center’s finances and appraisal were being ignored.
But attorneys for the bank said that despite increased use and revenue in recent months, the center’s debt load was such that it would never recover and that the county’s offer was in the best interest of bondholders despite losses that could top 70 percent of their investment.
The sale calls for the $10.55 million from the county to be placed in a trust account for the bondholders. U.S. Bank, Community Facility Partners and other parties would collect fees that are due them, and whatever remains would be dispersed to bondholders.
The judge’s decision ensures that the sale won’t entangle the county in other legal questions dogging the sports center, which include at least two lawsuits. Those issues will be dealt with apart from the sale, and are likely to take years to process.
Now that the judge has approved the sale, the county has 45 days to conduct its due diligence, some of which has already been done, Huffman said. He added that he doesn’t expect any surprises that would derail the sale plans.