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The largest investor in Block E -- the site proposed for the state's first non-tribal casino -- wasn't known publicly until Friday. He revealed himself as Irv Kessler, a publicity-shy hedge fund manager and real estate investor from Deephaven.
In an interview, Kessler said he's one of 11 mostly local investors who bought the struggling Block E retail complex last year for $14 million. Those owners stand to benefit considerably from the profits of a casino project, which is now being considered by politicians as a way to pay for a Vikings stadium.
At the Capitol, Bob Lux and Phillip Jaffe of Alatus LLC are the public face of the casino project, and they met with Dayton in October. But court records reveal Lux has been weighed down by financial troubles, making deep-pocketed investors critical to the deal.
The 56-year-old Kessler has stayed behind the scenes, but regularly consults with Lux and Jaffe about the future of Block E.
"Part of what I'm investing is in bricks and mortar," Kessler said. "And part of what I'm investing in, a big part of it, is [Lux and Jaffe's] vision and their ability to take that bricks and mortar and turn it into something."
Kessler also has ties to one of the operators interested in running the Block E facility. He and Minnesota casino maven Lyle Berman shared a house in Cabo San Lucas, Mexico, for 10 years. Kessler also once rented Minnetonka office space from Berman, the CEO of Lakes Entertainment. Lakes built and managed Grand Casino Hinckley and Grand Casino Mille Lacs, as well as many other casinos across the country.
But Kessler said he hasn't paired up with Berman on any casino or business ventures. He also said none of the other Block E investors is involved in the gambling industry.
"From time to time I've traded stock in publicly held companies that manage casinos," Kessler said. "But it's never been any type of focus of mine in any way. And I've never invested in a casino project anywhere."
Under the current legislation authorizing the Block E casino, the operator would be chosen by state officials. Several operators have approached the Block E team to express their interest, which the developers are noting for a later date. Kessler met with Berman personally.
Kessler said he was "a little skeptical" when he first heard about pursuing a casino at Block E. But he is now excited about the prospect of adding 2,500 full-time jobs to the city.
Jaffe said he and Lux are "implementing the plans and the vision" for the site.
"Irv brings a different discipline and knowledge and financial stability to our partnership that every developer dreams about," Jaffe said. "I mean, we've got the dream team. And that's what we're so excited about."
Kessler founded the hedge fund firm Deephaven Capital Management in the mid-1990s. He left in 2002 and soon opened an investment management firm, Provident Advisors, where he is now chief investment officer. Securities and Exchange Commission records show that Provident held shares of Las Vegas Sands Corp. in early 2011, and was invested in Lakes Entertainment and MGM Mirage in 2010. They are not currently invested in gambling companies.
Kessler also co-manages three entities that buy dozens of residential properties in Nevada, Arizona and Florida. He said Friday they purchase properties with "attractive characteristics that we can rent out and get a good yield on."
'Just holding on'
Kessler's backing may prove important for the future of Block E, since Lux has faced a series of financial setbacks in recent years. Lux helped put together two major downtown luxury condominium projects, Grant Park and the Carlyle.
But five years ago, the 54-year-old developer took out a second mortgage on his home to maintain his stake in the Carlyle, after cost overruns required investors to pitch in more capital. He started defaulting on payments for the $850,000 loan in 2010. A judge entered a $910,000 judgment against him earlier this year. It was vacated in March.
Jerry Baack, president and CEO of Bridgewater Bank, said the judgment was "satisfied" last spring and they "continue to have a business relationship with Mr. Lux."
Another judge entered three judgments against Lux last winter, requiring him to pay his ex-wife $1.09 million in missed divorce payments. That money hasn't been paid.
"I am working towards having the judgment resolved," Lux said Friday.
While fighting those judgments in 2010, as he was trying to acquire Block E, Lux said in an affidavit that a judgment is "in essence, a death warrant for a real estate developer." He painted his financial situation as dire and hoped that Block E would turn things around. "At this time, I am just holding on," he stated.
Nancy Lux, Bob's ex-wife, and her attorney declined to comment for this story.
Lux said his financial situation has improved since the "holding on" days.
"The good news is, if you go to work every day and work hard and have some good ideas, you can recover," Lux said. "And that's just what I've done. We've built a great business here."
Lux is one of the investors in Block E, but declined to say what percentage he owns.
'A very private investor'
Kessler also declined to say how much he has put into Block E. "I'm a very private investor," Kessler said. "I don't like to be high profile or to have my name associated with things, if I can help it."
That has largely remained true over Kessler's career, but he couldn't escape notice in 2009 when his $3 million McLaren F1 sports car caught fire near an airport in Santa Rosa, Calif. The F1 was once considered the fastest car in the world. Only 106 were ever made.
The car, whose burnt silver frame lives on in Internet photos, was insured for $2 million.
Eric Roper • 612-673-1732 Twitter: @StribRoper