$10.5 million is offered for the troubled Vadnais Sports Center, but some bondholders hold out.
Ramsey County has signed a letter of intent to buy the troubled Vadnais Sports Center for $10.55 million with hopes of completing the purchase by May 5, according to court documents.
The county last week put down a $250,000 deposit on the building, which would become its newest ice arena. A hearing on the sale, which is subject to a judge’s approval, is scheduled for Monday in Ramsey County Probate Court.
Some of the bondholders who financed the building’s $26 million construction cost, however, oppose the deal and plan to argue against the sale in hopes of continuing to lease the building and recover more of their money.
But U.S. Bank, the trustee handling the sale on behalf of the bondholders, has said in other court documents that bondholders will never make a full financial recovery, and that selling the building — which includes a 100,000-square-foot domed fieldhouse and two indoor ice rinks at the corner of County Road E and Hwy. 61 — is their best option. The bank has discussed the deal with bondholders in several conference calls over the past three months.
Bondholders have been divided on the issue, with some ready to cut their losses while others are pressing to keep the building.
Ramsey County Commissioner Blake Huffman, whose district includes Vadnais Heights, said the county will let the court proceedings play out. But, he added, he is confident the sale will go through.
“We’re real excited, it looks like things are going to be moving forward,” he said Monday. “It’s a great asset for the county. It’s going to be the crown jewel of our ice rinks.”
It will also be the county’s first rink that supports itself financially, thanks largely to the reduced purchase price.
“I think that’s real important,” Huffman said. And given all the money Vadnais Heights has put into it, keeping public ownership is a benefit, he said.
The sale agreement will ensure the county is not drawn into the legal tangles, Huffman added.
“There are a lot of people angry with different groups that have been involved with this, but the county is not going to be one of those groups,” he said.
Besides Ramsey County, two other bidders had expressed interest in the state-of-the art sports facility, beset by legal and financial woes after it was built in 2010 using revenue bonds issued by Vadnais Heights on behalf of a Deephaven-based nonprofit group called Community Facility Partners. The building was put up for sale in 2013 after revenue projections that turned out to be overly optimistic failed to cover costs, and after Community Facility Partners defaulted on the bonds and the city stopped helping financially.
One bidder, Gem Lake Lodge LLC, a North Oaks-based nonprofit affiliated with the White Bear Lake Hockey Association, notified U.S. Bank late last month that it could not pull together the needed financing by the bank’s deadline. Its $10.65 million bid was slightly higher than the county’s bid, but the county’s offer is straight cash.
The other bidder, Northern Educate Hockey Academy LLC, which has been operating sports and academic programs at Vadnais Sports Center under a lease arrangement, had submitted the highest bid at $13 million. However, it missed a December deadline for a letter of intent to buy the building.
Part of Northern Educate’s financing plan involved bondholders becoming vested in the company as part of the capital-raising effort. The court documents also showed that Northern Educate planned to add a third ice sheet to the Sports Center. In its pitch to bondholders, it said it planned to entice a United States Hockey League team to Vadnais Heights.
However, Northern Educate defaulted on its payment obligations under the lease by not paying rent in January and February, documents show. Also in January, Northern Educate was acquired by another company, Ability Academic & Athletic LLC, and sublet its interest in the building, which violated terms of the lease.
Last month, Northern Educate, along with its new owner, the city of Vadnais Heights, U.S. Bank and Community Facility Partners, was sued by Roseville contractor Carlson-Lavine Inc. in Ramsey County District Court over unpaid bills of more than $136,000 for labor and materials for building improvements.
Despite those troubles, some bondholders and at least one investment adviser argue U.S. Bank has not considered keeping the lease arrangement in place and giving the new ownership a chance to succeed.