(First published in the June 28, 2018 issue of City Pages)
But Wausau’s Riverlife is the latest in a domino of development debacles for Mike Frantz
Two building sites sit along the Wisconsin River north of downtown Wausau, abandoned. No work has happened for months on the projects, collectively referred to as Riverlife, and the construction company building them has a $2.7 million lien on developer Mike Frantz’s Quantum Ventures.
The project appears eerily similar to two other concurrent Frantz projects, in which the financing fell through: The Hotel Northland in Green Bay is expected to open this fall, but will do so without Frantz after the property went into receivership, then a new owner, following loan defaults. A similar scenario recently played out in Fort Madison, Iowa, where Frantz took the lead on three downtown projects.
The questions in Wausau are, what happened with the Riverlife project, and what will happen going forward?
Development projects are complicated and involved multiple parties. But the bottom line is that problems with Frantz’s projects in Iowa and Green Bay caused the money stream to run dry in Wausau. Frantz tells City Pages that he lost $20 million in the Hotel Northland debacle—in May the legally entangled project went to a new owner—because his losses trickled down to Iowa and Wausau. “When you go in default on one commercial loan you go into default on all of them,” Frantz says.
Frantz says he’s confident that he can still complete the Riverlife project in Wausau, though the city is already soliciting bids from other developers to either take over or build somewhere else on the 16-acre parcel. Those are due to the city by Aug. 3, and the city has given Frantz until later in August to “cure” the default of his development agreement with the city. That default was triggered when the Wausau-based construction company Samuels Group filed a lien on the project for work completed so far, to the tune of $2.7 million.
Basically, Riverlife never had a senior lender to put up the bulk of the money, Frantz says. Backers have come and gone. Jason Sharkey pulled out this spring after it was revealed by the Wausau Pilot that he’d once been involved in a real estate scheme in Colorado. The next financier, Rainy Investments, has since passed on the project, its CEO, Chicago developer Ken “Bucky” Buckman, told City Pages last week.
Meanwhile, Frantz says he and Samuels Group decided to proceed with construction of Riverlife without that senior lender in place in order to meet the city’s deadlines. That was necessary in order to fully receive the incentives ($2.74 million in tax incentives) the city was offering, Frantz says.
Those benchmarks were included in the development agreement with the city to ensure the project is completed in a timely fashion and to hold the developers accountable, says Community Development Director Chris Schock. No extension was asked for, Schock says. “He’s had literally years to get the project moving.”
Riverlife and two other projects Frantz was in involved in — Hotel Northland and three downtown historic building renovations in Fort Madison, Iowa — saw similar construction pauses in 2016 while financial troubles loomed.
Eventually Frantz announced he would be taking over the Riverlife project from Frantz Community Investors, which his brothers are also involved in. “We decided to split up our assets after Hotel Northland went south,” Frantz says.
According to Frantz, the builder on that project violated the terms of the lending agreement, which led to a default on the loan.
Paul Swanson, the attorney who took receivership of the hotel as the entanglements worked through court, says Frantz picked a bad partner in contractor Keith Harenda, who owned construction company KPH—Swanson says having a contractor also be a partner is never a good idea.
The project went way over budget, and in reviewing the bills, Swanson says Harenda’s company spent hundreds of thousands of dollars on things such as commissioning two competing designs from very expensive firms, and even hosting a beauty pageant to bring people through the hotel. All that on a project where every penny counted. “I’m seeing all this money spent and asking ‘why did you do that?’” Swanson says about Frantz. “It’s not illegal, just isn’t very smart.”
Frantz and Harenda disagreed about spending and lenders, ultimately leading Harenda to want to buy Frantz out. But Harenda never paid, Swanson says.
All told, Frantz says if not for Hotel Northland, “I would be $20 million richer today.”
Green Bay city officials learned about the troubles when they heard from banks that Frantz was “unbankable,” meaning no one would lend to him, says Green Bay Development Director Kevin Vonck.
“That came as a shock to us,” says Vonck, who says the mayor traveled to Iowa to personally inspect Frantz’s previous projects. “The finance department had vetted his personal financial statements. At the time he [Frantz] had the resources to complete the project.”
According to a report in the Green Bay Press Gazette, the same thing happened in Fort Madison in 2016 on three downtown renovation projects, including a hotel renovation into apartments. Work stalled and subcontractors went unpaid, and eventually the city sought out other developers for the projects.
Despite the obvious ding to his credit and finances that the Hotel Northland debacle brought, Frantz is still confident that he can lead a successful Riverlife project. “We will get it done,” Frantz says.
Wausau city leaders say they’re still talking to Frantz to make the project work.
But the money stream is dry. City Pages learned that Quantum Ventures is behind on rent at its Wausau office in the City Square building and a 30-day notice of termination was sent out Monday, officials from Compass Properties confirmed.
Though his own firm passed on financing the Riverlife project, Buckman had good things to say about Frantz, and he’s confident that Frantz will pull it off in the end.
“I’ve known Mike Frantz for a while, and my experience is he figures things out regardless what is thrown at him,” Buckman told City Pages via email. “My guess is he will on Riverlife as well, and you shouldn’t short his stock.”
Frantz’s success on Riverlife will depend on financiers and lenders feeling the same. Meanwhile, the city is keeping its options open as new proposals are due to the city Aug. 3.