611 Building Foreclosure By City Eliminates Esperanza Unida's $790K Of Liens/Debts

Esperanza Unida, Inc. lost ownership of the 611 W. National Ave. building for tax delinquency totaling more that $176K.

By H. Nelson Goodson

January 4, 2015

Milwaukee, WI - On Monday, the City of Milwaukee took title ownership of the Esperanza Unida, Inc. 611 W. National Ave. building on a foreclosure action for more than $176K as a result of delinquency property taxes. The city and taxpayers now own the 611 building at a cheap cost for tax delinquency, since the building is accessed at nearly $2M.

The five current tenants at the building have made arrangements with the city to temperarily stay at the location, but their future at the building is uncertain.

Manuel "Manny" Pérez, the executive director for Esperanza Unida, Inc. has confirmed, that the city has taken ownership of title for the 611 building and taxpayers won't be responsible to pay about $712K in liens against the building. The city foreclosure has eliminated at least $790K in bank liens and debts incurred at the 611 building.

Pérez in a released statement said, "The foreclosure effectively prevents that the tax payers of the City of Milwaukee pay $712,000 to the U.S. Department of Commerce given that the City of Milwaukee is a co-applicant of the 611 International Building. The lack of economic development in the Milwaukee South Side prevents attracting tenants that can sustain proper rental rates. Those factors –together with the existence of accumulated toxic debt- justify the need for ownership to be transferred to a qualified investor that can infuse capital to the 611 Building, to conduct additional improvements that the building will need, and accelerate economic development along 6th and National Avenue. This should also contribute to creating additional jobs in a community that is in serious need of economic development and job creation."

In 1994, the Economic Development Administration (EDA) gave Esperanza Unida a $712,800 grant to the organization for a $1.06M renovation project for the first and second floors of the 611 building on top of more than $600K in bank loans Oulahan took out on the building as collateral, which the EDA never approved. The city is now seeking buyers for development of the 611 building.
Esperanza Unida is facing more than $300K in deficit and might now proceed for a Chapter 11 and reorganization filing to keep creditors from collecting other debts and keep the non-profit organization afloat.
The Esperanza Unida owed the city over $176,771.60 in property taxes and had more than $600,000 in bank liens.

The 611 property is assessed at $1,948,000, but owed delinquent taxes for 2013, $66,556.24; for 2012, $64,103.63 and for 2011, $46,111.73, a total of $176,771.60, plus incurring tax delinquent penalties per month. 

Currently, Esperanza Unida owed over $180,000 to WE Energies and was facing more than $1.2M deficit.

Pérez had been working with the City Attorney's Office for a smooth transition of title ownership in the last few months. Pérez will temperarily manage the 611 building for the city, according to tenants.

In the last year or so, the community and city hall, including the Mayor Tom Barrett's office have failed to backup or support Esperanza Unida it's financial deficit dilemma. Mayor Barrett and the city have a partnership with Esperanza Unida, but when the organization asked for help, Barrett and the city turned their back on the organization.

Esperanza Unida under the late former Richard Oulahan and predecessors have made the non-profit organization a success. The organization provided job training programs that helped thousands of low income and unskilled community residents to learn a trade and who later became productive and tax paying citizens in Milwaukee and surrounding areas. Esperanza Unida also worked with other organizations to expand on their initiatives geared for job and technical skill training. Today, none of those that have actually benefited in one way or other from the fruits of Esperanza Unida have stepped up to help the ailing organization. 

Currently under the Pérez administration at Esperanza Unida, the 611 building has been upgraded to make it a competitive real estate business property in the district, even though a lack of development has been absent in the area. Five businesses remain at the 611 location, Reynas Entertainment and Mexican Restaurant, SWC Asbestos, El Sol Broadcasting, VIVA Health Care and a new business, Staffing Partners, a temperary branch employment agency, which moved into the building in November.

The BMO Harris Bank (formerly Marshall & Ilsley Bank) held several liens on the building for more than $600,000. An Oshkosh developer had offered to pay $1.3M for the building and turn it into a 55-unit loft apartments, but that deal went sour after the banks and the U.S. Department of Commerce (USDC) would not release the liens and allow the sale of the building.

In brief, Oulahan took out several real estate mortgages in 1994 totalling $600,000 ($600K) in loans from Marshall & Ilsley Bank (M&I, now BMO Harris Bank) without a Board Chair signature. Oulahan in 2002 also "signed for loans using the preexisting loan as line of credit and the 611 West National Building and the 1329 Building as collateral...The debt crippled the organization financially as it set it in a course of chronic indebtedness and lower revenues that became more complex as the organization fell behind in IRS taxes, UI, DOR, and many others and it caused serious disrepair due to lack of maintenance and repair budgets. This was worsened by the downturn in the economy," Pérez stated.

Pérez has also confirmed that there is no record on file about what ever happened to the M&I loans or how they were actually spent, but has reported the alleged inappropriate use of funds to the USDC. The USDC is investigating to determine how the 1994 and 2002 additional bank loans were used.

City of Milwaukee: Historic Land Use Investigation PDF Report (12/1/2014) http://alturl.com/a6dnv