Lawsuit filed against firm tabbed by Hofbräuhaus developer to finance hotel

The financier for the proposed $28 million Hyatt Place hotel near the Hofbräuhaus has been described in a federal lawsuit in Michigan as being a “rogue commercial lender.”

And in Jonesboro, Arkansas, construction on a Hyatt Place hotel and convention center being built by the same family developing the Belleville projects has stalled as contractors have filed liens totaling about $900,000. The chairman of a Jonesboro city commission that has approved funds for marketing and tax incentives worth up to $500,000 said the delays “raise some serious red flags.”

The Keller family, of Effingham, developers of the Hofbräuhaus, announced in early November that ICON Commercial Lending, of Utah, would provide financing for the Hyatt Place hotel, located off Illinois 15, across from the National Shrine of Our Lady of the Snows.

“We are aware of several situations involving ICON Commercial Lending,” Chuck Keller said in a prepared statement. “At this time, we are not discussing any details or any of our arrangements concerning any of our business partners.”

The two ICON officials cited in the lawsuit, Randall Farr and Brent Watson, could not be reached for comment.

ICON Commercial Lending was sued Nov. 21 in Michigan by two real estate investors who alleged the company did not secure $12 million as promised and has not refunded them $310,000. ICON is accused of breach of contract, fraud and negligent misrepresentation. The case is pending.

The Kellers said in November that ICON Commercial Lending would provide up to $30 million for the six-story, 130-room Hyatt Place and 40,000-square-foot conference center to be built next to the Hofbräuhaus German-style restaurant and brewery under construction in Belleville. Chuck Keller also said at that time his family was working with ICON on the hotel project in Jonesboro.

Construction on the Hyatt Place in Belleville has not yet begun. Chane Keller, one of Chuck Keller’s sons, said last fall that work on the hotel was expected to begin this spring. Work on the Hyatt Place in Jonesboro began last year but work has since stopped. Chris Keller, another son of Chuck Keller’s, has told Arkansas officials that “our private equity partner has experienced a delay in providing the funds for which we had contracted.”

Belleville Mayor Mark Eckert told aldermen Monday that he and City Attorney Garrett Hoerner were scheduled to meet Thursday with leaders of the Missionary Oblates of Mary Immaculate, the religious order that oversees National Shrine of Our Lady of the Snows. However, Eckert said in an email Thursday that the meeting was canceled and will be rescheduled.

The Missionary Oblates own the land off Illinois 15 where the $12 million Hofbräuhaus is being built. The Kellers first announced their plans over two years ago in early 2015.

“We’re going to be talking about everything,” Eckert told the City Council on Monday when Ward 2 Alderman Mike Buettner asked for an update on the project. “I’m hoping to get a lot of questions answered myself.

“We have a list of things to ask and a list of things to hopefully get some answers to,” Eckert said. “Believe me, nobody wants more answers than the people sitting here. We’re anxious. We’re trying to be patient that we don’t shoot ourselves in the foot, but we’re trying to make sure we get what we duly have coming, and that’s a project delivered.”

Buettner said in an interview the delays in the Belleville project appear similar to the ones in Arkansas.

“The Kellers said ICON was ... backing this deal last fall,” said Buettner, who has voted against tax incentives for the Kellers. “Did anybody in the administration take a look at that? Were they a legitimate company?”

Belleville has spent over $2 million to extend sewer lines to the site where construction on the Hofbräuhaus began in late 2015. The city has also approved a plan that allows the Kellers to get $32.36 million in tax incentives based on city tax revenue generated by businesses that open at the site. The developers have proposed hotels, a conference center, restaurants, a soccer park and a convenience store for the 33-acre site, but none of them have opened. The Kellers’ spokesman, Ron O’Connor, has said the Hofbräuhaus is expected to be finished late this summer, which would be more than a year later than when it was first scheduled to be open.

“The citizens of the city have lived up to their part of the bargain, and right now we have completed our sewer line out to a project, and we have nothing to hook it up to,” Buettner said.

“I hope the project goes,” Buettner said. “We have a lot of money invested on our end, but as of now, I just don’t see it happening.”

Eckert said he couldn’t comment on the details of the ICON lawsuit, but he told the council the issue may be discussed with the Oblates. He also declined to comment on the Jonesboro project because the city is not involved in that.

A representative from Hyatt could not be reached for comment about the Keller family’s plans for Hyatt Place hotels in Jonesboro and Belleville.

O’Connor previously has said ICON would own 50 percent of the hotel, restaurant and conference center in Belleville, and the other half would be owned by the Keller family and a group of investors. The Keller family would operate and manage the complex.

About three weeks before the Michigan lawsuit was filed against ICON, Farr and Watson, a Keller family news release stated “ICON Commercial Lending Inc. has invested in a partnership with Oak Tree Management to own the hotel/conference center/restaurant and has guaranteed up to $30 million for construction, according to ICON Managing Director Randall Farr.”

During a news conference on Nov. 2, Chane Keller said, “They are ready to fund in the next 30 days.”

Oak Tree Management is the Keller family’s company developing the proposed hotel and restaurant complex in Belleville.

Farr was quoted in the news release as saying: “We at ICON are excited about participating in this hotel/conference center project with Oak Tree Management and the Keller family. We believe this overall development will be a huge benefit to the city of Belleville, to St. Clair County and to the entire St. Louis area.”

ICON lawsuit

The federal lawsuit in Michigan alleges ICON Commercial Lending, Farr and Watson failed to provide $12 million in financing as promised.

Robert Loomis and Jennifer Oliver, the real estate investors who filed the suit, claim Loomis’ company, Concrete Jungle, put $235,000 into an escrow account and that ICON received the money in 2015, according to the lawsuit.

Also, based on promises from ICON, Loomis and Oliver paid $240,000 as deposits to third parties with whom they had contracts to purchase property.

In April 2016, ICON said it would refund Loomis and Oliver $310,000 but that did not happen, the lawsuit alleges.

“This is a breach of contract case against a rogue commercial lender and its two principals, who deceived two local real estate investors into a series of fraudulent agreements, and then perpetuated their fraud by making false statement after false statement about their desire to make good on their promises,” Loomis and Oliver allege in the suit.

“ICON’s goal was only to collect the $235,000 in ‘fees,’” according to the suit.

Loomis and Oliver state the defendants gave the following excuses as to why there were delays in funding:

▪  The Greek financial crisis

▪  Problems with the bank guarantee issuer’s litigation in Europe.

▪  Travel problems to and from Hong Kong.

▪  Travel problems within Europe.

▪  Health problems and holidays.

ICON said it would “secure” its obligation with five Brazilian oil bonds worth $55 million, but the lawsuit alleges the bonds are “actually worthless.”

A judge has ordered ICON to retain an attorney by May 12. If the company fails to follow this order, a judgment may be issued in favor of Loomis and Oliver.

‘Red flags’ in Arkansas

The Advertising & Promotions Commission in Jonesboro has given Chris Keller a deadline of May 19 to document progress on the stalled Hyatt Place hotel project in Jonesboro or face losing financial support from the commission.

Contractors said in court papers they have not been paid and have placed liens on the site off Interstate 555 in Jonesboro, which is home to Arkansas State University in the northeastern part of the state.

Craighead County, Arkansas, court records show Naylor Concrete and Steel Erectors LLC, of Mount Vernon, Arkansas, filed a lien for $458,698 against the hotel site March 23. Records also show that KEG Construction LLC, of Paragould, Arkansas, filed a lien for $413,175 against the site Feb. 13.

“Needless to say, this has raised some serious red flags with me personally, along with the other commissioners,” Jerry Morgan, chairman of the commission, said during the board’s April 5 meeting.

Chris Keller could not be reached for comment. He did not attend the April 5 meeting of the Advertising & Promotions Commission, but he sent Morgan an email shortly before the meeting began.

“We continue to move forward with our project to bring Northeast Arkansas a premier world-class hotel and convention center,” Chris Keller wrote in the email. “As many of you are aware, our private equity partner has experienced a delay in providing the funds for which we had contracted. We continue to work to bring construction back up to speed, so we can deliver the highest quality facility to Jonesboro, as promised.”

Last year, the commission agreed to give Chris Keller, CEO of Northern Arkansas Hotel and Convention Center LLC, $300,000 in funding for marketing with $150,000 to be provided in 2017, $100,000 in 2018 and $50,000 in 2019.

Also, the commission voted to allow Chris Keller to receive up to $200,000 in hotel sales tax collected in the first three years the hotel is open.

Chris Keller received $75,000 of the marketing funds earlier this year.

Morgan said $5,000 has been spent already for promoting the project, but he said the commission is seeking to have the remaining $70,000 returned if Keller doesn’t provide documentation that the project can move forward.

The commissioners voted April 5 to request Chris Keller provide the board with a letter from a bank or investor guaranteeing funds are available for the hotel and convention center.

Other requirements include:

▪  A commitment letter from Hyatt Hotels showing its support for the project.

▪  Proof that all vendors have been paid.

▪  A “reasonable” time frame of 90 to 120 days for the building to begin coming out of the ground.

If the Jonesboro project is completed, it is eligible for up to $7.5 million in tax credits, according to the Arkansas Economic Development Commission. Chris Keller told the state commission that he was planning to build the 147-room Hyatt Place, a second hotel with 114 rooms and a 77,616-square-foot convention center valued at $50 million. He reported the project would have a rooftop “artisan cocktail” garden with indoor and outdoor seating.

This story was originally published April 21, 2017 at 12:35 PM with the headline "Lawsuit filed against firm tabbed by Hofbräuhaus developer to finance hotel."