Unsold and Neglected: Six major Finlandia properties face abandonment
“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.
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.
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UPSET presentation and donation, Finlandia's president makes appearance, fire chief stipend boosted
Hancock City Council, Sept. 15, 2021
Meeting Highlights
Finlandia University’s president visits the council, offers update
Finlandia’s president, Philip Johnson, was the first to present to the council on Wednesday night. He started by thanking the council. He told them Finlandia had 6% growth in their student body and 9% growth in their student residence halls, and other statistics. He said the remodeled historic high school was near completion and that he was looking forward to having an open house to show the public the new spaces, including an auditorium and gymnasium. Finlandia is requiring masks for all students, vaccinated or unvaccinated, inside the classroom. Weekly testing is required of the non-vaccinated. He said employees are about 85% vaccinated. Across the whole campus, they’re at about 72% vaccinated, which includes staff and students, and they have incentivized getting vaccinated. Finlandia celebrates its 125th anniversary this week, and Johnson said they have more activities planned in the run-up to their Finnish Independence celebration.
Chief Donnelly informs board about UPSET West, council approves donation to the team through Portage Health Foundation
Chief John Donnelly of the Houghton Police Department spent some time informing the council about UPSET West’s substance enforcement work, how they’ve grown, what the team does, and how important Hancock’s contribution would be. Chief Wayne Butler from Hancock’s police department and Lt. Nick Roberts from Houghton Police Department were also there to support the donation. Donnelly, who is also part of UPSET’s board, said that the buy-in from the local governments was more than matched by the state. The UPSET West team is currently five officers, and Donnelly said that safety procedures dictate that at least four officers are needed to run undercover sting operations, so maintaining funding is important. Donnelly said they attempt to push local dealers into drug court, and out-of-area traffickers into federal prisons. The team also facilitates cross-jurisdictional operations across city, county, tribal, and state lines. Donnelly took questions from the council after his presentation was over.
Chief Donnelly’s talk lasted for about 30 minutes. If you have any interest in UPSET West, I recommend watching the full video clip.
Later in the meeting, the council approved an immediate $5,000 donation to Portage Health Foundation, which acts as the fiduciary of the money for UPSET West. They also committed to four more years of $5,000 payments but acknowledged that another council could reverse that during the budget process. Councilor William Lytle was the lone dissenting vote. Before the vote, he stated that he disagreed with the overarching strategy of the “war on drugs” in addition to more specific objections, but said he did support trying to keep substance abuse out of the community.
During City Manager Mary Babcock’s report, she shared news that the fundraiser for the dog park had exceeded the goal and that the dog park should be fully funded without anything being committed from the city’s general fund. Applications are closed for the Department of Public Works director position, and Councilor Whitney Warstler joined the hiring committee. The bathhouse renovation is nearly complete at the city campground. Babcock will be visiting San Antonio, Texas to learn about the Bridges Out of Poverty program in a trip sponsored by the Portage Health Foundation, which has sponsored other Bridges Out of Poverty training in the community as well. The big bump at the corner of Elevation and Ingot Streets that a citizen brought to the council’s attention at the last meeting is being put out for bids to see if it can be fixed before the end of this construction season. Babcock said the zoning update is well underway and should begin coming to the council before the end of the year.
Fire Chief’s special stipend established
The monthly stipend to Hancock’s volunteer fire department was unanimously increased by $350 so that Fire Chief William Lepisto can get a stipend for acting as fire chief and fire marshal. Babcock also said the hours Lepisto put in, particularly in emergency events like the Santori’s Corner spill this year, warranted the special stipend. Previously, Lepisto was compensated the same as other volunteers, an even split of $1,320 per month.
Councilor’s closing notes
Councilor Ron Blau happily announced his team’s victory in the World GUTS Frisbee Championship to a brief round of applause.
Councilor John Haeussler announced a presentation about how Copper Country impacted University of Notre Dame hockey leading up to the Oct. 15 Michigan Tech hockey opener against Notre Dame.
Councilor Warstler shared that a new salon has opened, run by Councilor Blau’s daughter. It’s called Mood Spa.
Councilor Rick Freeman Jr made a statement acknowledging the importance of 9/11.