Unsold and Neglected: Six major Finlandia properties face abandonment
Quincy Green is often the site of public events, like the Canal Run. Photo courtesy of Brockit Photography.
Finlandia University is in receivership, a judicially supervised dissolution process. Almost everyone in the Keweenaw knows that. But what is receivership anyway? What does it mean and how does it work?
Receivership is a powerful legal and financial mechanism designed to protect the interests of creditors when a company or property is in default or facing severe financial distress.
In this process, a court-appointed receiver takes control of the assets and operations of the entity in distress. The receiver's primary responsibility is to maximize the value of the entity's assets to repay its creditors. This often involves selling assets, restructuring operations, or even running the business for a period of time.
While receivership can be a challenging process for the entity involved, it's often a better alternative than bankruptcy.
Per the Michigan Receivership Act of 2018, a court appoints an independent receiver, or trustee, to take possession of commercial property that is in default on its debts and receive, collect, care for and dispose of the property or proceeds from the sale of the property.
Finlandia’s board voted in March to seek state court receivership. They had three choices: state receivership, federal receivership or bankruptcy.
Receivership put all the university’s real estate and personal property up for sale.
The university’s receiver is O’Keefe and Associates Consulting LLC, appointed by the Ingham County Circuit Court on recommendation from the Finlandia University board. Ingham County is the headquarters of the Michigan Attorney General, and the Attorney General is the one who files for receivership with the court.
Patrick O’Keefe
The university’s board recommended O’Keefe and Associates because of their experience in higher education and their respect for the community and stakeholders, said CEO Patrick O’Keefe.
“We understand the impact of the loss of Finlandia on the community,” he explained. “There’s a right way and a wrong way to bury things. We hope we are doing it the right way.”
What Happens During Receivership
During receivership, the receiver steps in to manage the university’s assets, making all financial and operating decisions. According to the Receivership in Real Estate Transactions on the website of LexisNexis—a firm that provides verified legal information to lawyers, corporations and academics worldwide—receivership allows courts to preserve and/or maintain the value of assets.
If it can be avoided, lenders usually do not want to foreclose, taking title to assets or real property collateral, the Practical Guidance Journal says. They want to avoid the expense and effort of foreclosure and having to assume the responsibilities and liabilities of ownership.
In Finlandia’s case, some of the lienholders are resisting the purchase offers the receiver has brought them. O’Keefe declined to name any of the property’s lienholders.
“The secured lenders were unwilling to work with a national real estate marketing firm for the auction, or fund ongoing expenses,” O’Keefe said. “They wouldn’t cooperate with us. These properties are generating almost no interest above the mortgages.”
There are 27 properties in Finlandia’s receivership, two were sold pre-receivership, O’Keefe said. His firm has sold three others. Eleven are under sales contracts and three are going to auction. Two are being purchased by the City of Hancock, and the city is negotiating for three other Finlandia properties.
At this week’s Hancock Public Schools board meeting, they closed on the purchase of McAfee Field for $400,000.
City of Hancock’s Involvement
Hancock is purchasing Quincy Green and the Ryan Street Community Garden, said Mary Babcock, Hancock city manager. The city is paying $140,000 for Quincy Green and $27,000 for the community garden. Hancock is looking at purchasing three properties on Franklin Street that the receiver has filed a motion to abandon; Mannerheim, Nikander, and Wargelin Halls. The city council approved a purchase agreement for the properties on Oct. 17 for a total of $30,000. Babcock said they have no specific plans for the properties yet, but the council vote was unanimously in favor of making the purchase.
If they are abandoned, there would be no current owner and it would take a minimum of four years to have a tax foreclosure, Babcock said. The city is putting Finlandia properties on the tax rolls next January, and if there is no owner, no taxes will be generated. The city is also concerned about the security of buildings left empty for such a long time.
The Ryan Street Community Garden. Photo via Patronicity.
“It’s a tough situation,” Babcock said.
It’s important if residents have an opinion about the purchases, that they contact the city at 906-482-2720 or email manager@hancock.net, she added.
Properties already approved for sale in Ingham County Circuit Court include three parcels on Navy Street and a building at 417 Mine St., according to online court records. O’Keefe has filed motions to sell McAfee Field and four lots on Franklin Street.
Abandoning Properties
O’Keefe has also filed a motion in Ingham County Circuit Court to abandon some of the largest properties on campus. He told the court they could not find buyers willing to pay enough for the buildings.
The six properties O’Keefe has filed to abandon are the Jutila Center, Mannerheim Hall, Nikander Hall, Wargelin Hall, the Paavo Nurmi Center and Old Main, though the city of Hancock has since agreed to purchase the three residence halls.
“These big ones, they have been neglected for a very long time, and no one wants to pay for them,” he said.
“There was some initial interest in the Jutila Center at amounts that wouldn’t cover the lien,” O’Keefe said. “That’s true with Old Main, too. Paavo Nurmi doesn’t have any parking, and the lender didn’t want to put it into an auction.
If the properties are abandoned, Finlandia will still own them, but will not be responsible for the upkeep, O’Keefe said. He hopes that putting the buildings in limbo will accelerate discussions with lenders.
“Right now, we’re not even getting responses,” he said. ‘It’s crazy. Nobody has a sense of urgency, but we do because we don’t have the money.”
A hearing on the motion to abandon was delayed until Oct. 18, while O’Keefe tries to work things out with the lenders.
“They wouldn’t let us sell them, and they didn’t want to foreclose on them,” the receiver said. “Some have been more cooperative than others. We think the motion for abandonment was a wake-up call, a little sobering.”
The receiver explained that he needs to generate revenue to pay teachers who deferred salaries, as well as local creditors. Also, with little or no equity, the firm cannot fund the costs of maintaining and heating the largest properties over the winter, he said.
“Our singular focus is to get enough money to pay the teachers who delayed pay through the summer, as well as local creditors,” said O’Keefe.
O’Keefe’s firm had initially planned to auction off Finlandia properties in October. However, the secured lenders were unwilling to work with a national real estate marketing firm for the auction or fund ongoing expenses, O’Keefe said.
The commercial real estate market is relatively soft in our area, O’Keefe said. Only 38 commercial properties have been sold here in the past two years, “and the Finlandia receivership dumped 27 on the market at once,” he said. Still, he adds, “I am cautiously optimistic.”
Photo by Paul R. Burley, via Wikimedia Commons.
