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DSU Foundation receiver moves to release Blue Hawk Square for debt relief

The Dickinson State University Foundation is moving towards liquidating its real estate holdings to help meet its debts. That includes off-campus student housing building Blue Hawk Square.Court-appointed foundation receiver Sean Smith said he wil...

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The Blue Hawk Square student housing facility, which is attached to the Oasis Motel on Villard Street, is shown Friday. (Press Photo by Dustin Monke)

The Dickinson State University Foundation is moving towards liquidating its real estate holdings to help meet its debts. That includes off-campus student housing building Blue Hawk Square.
Court-appointed foundation receiver Sean Smith said he will make a motion to turn over ownership of Blue Hawk Square, located at the corner of Villard Street West and 10th Avenue West, to Dacotah Bank, the first lien holder on the property, in exchange of satisfaction of the foundation’s debts owed to the bank.
DSU President Tom Mitzel said Blue Hawk Square was never considered an official part of the university’s stock of available housing.
“We actually have quite ample housing on campus and I don’t think we had that many students in Blue Hawk Square,” Mitzel said. “ … I don’t know about its future. It did not come back to us as a property and I don’t think that it will.”
Mitzel, who arrived on the DSU campus after the foundation had been forced into receivership and ordered for dissolution, said he “tried not to get too caught up” in what was happening to it as the university oversaw the formation of a new, unaffiliated foundation tasked with fundraising to provide student scholarships.
To that end, the receivership has also filed a pending motion to sell the former DSU Foundation headquarters on the university campus, as well as two lots adjacent to that facility. The university has entered into an agreement to buy the property and is awaiting the finalization of an appraisal of the house and land.
The new foundation, which is called the Dickinson State University Heritage Foundation, would likely move its operations into the house after the university acquisition. The Heritage Foundation exists in a hierarchy that places its activities under the oversight of the university president, a safeguard that the old foundation did not have.
In addition to the former foundation’s properties connected to the university and its students, Smith also filed pending motions to sell the Miller, Bosch and Altringer apartment buildings currently held by the foundation.
Within those motions, Smith sought approval of a sale to be made “free and clear of all liens and encumbrances.”
Such a sale would be made under the condition that “any and all liens, encumbrances, or claims will attach to the net sale proceeds generated from the rental units.”
Various stakeholders in the properties have objected to that language.
Smith,a partner of Tschider & Smith Law Firm in Bismarck, said the Bosch family is included among that group.
The Bosch apartment building came to the DSU Foundation through a gift annuity agreement made between the family and the foundation, in which the latter party agreed to pay the family annuities for use of the property.
Smith stopped annuity payment disbursements to “beneficiaries under contracts” with the DSU Foundation as per the terms of the order for court supervised dissolution of the organization.
On Feb. 15, Michelle Donarski, a shareholder with Anderson, Bottrell, Sanden & Thompson Law Firm of Fargo and a legal representative for members of the Bosch family, sent a letter to Smith noting the family had not received the annuity payments due on Jan. 1 of this year.
The letter states the family members received the first annuity payments on that date in 2013 and in the subsequent two years. However, the brief states, the family anticipates the payments will “no longer be forthcoming.”
“Accordingly,” the brief states, “the Bosch Families seek rescission of their warranty deeds for the gifted apartment buildings due to lack of consideration.”
The brief concludes with the agreement of the Bosch family members to restore the foundation by returning the annuity payments the family received in the last three years. In return, the family requested the net rents received on the gifted apartment property from 2009 to the present.
In addition to the family, First International Bank and Trust of Watford City has also filed an objection to the “free and clear” sale of the Bosch building.
The objection filed on March 1 by First International’s legal representative, Jon Brakke of the Vogel Law Firm, states the bank holds first-position mortgages on the apartment building and is owed a total of $8 million in debts by the foundation.
A conditional objection filed by Brakke on March 10 stated “escrow of the net proceeds from sale of the Bosch Apartments will result in unnecessary interest accrual” on the foundation’s debt.
“As a consequence,” the response continues, “the net proceeds from sale of the Bosch Apartments should be disbursed immediately to First International.”
Away from the Bosch Apartments, the proposed sale of the Altringer and Mille properties is also subject to stakeholder disapproval.
Peter Zuger of the Serkland Law Firm, representing former Dickinson developer Granville Brinkman, who won $1.5 million in arbitration against the DSU Foundation last summer, filed a brief in opposition on March 7 to Smith’s motion for approval of the sale of the Miller and Altringer apartments.
In that brief, Zuger objected to the same piece of “free and clear” language and stated Brinkman is the only lien holder on both buildings.
“There is no North Dakota law that allows the Receiver to sell the property free and clear of all liens and encumbrances,” the brief stated.
In the event the motion to sell is approved and the court allows the individual liens to attach to the net proceeds of the sale, the brief states, Brinkman “requests that the lien attaches as of the date of his original judgment” against the foundation, which was filed in March 2014.
A hearing is being held at 1:30 p.m. Thursday, April 21 at the Stark County Courthouse which will allow all objections to the proposed sales to be heard before Southwest District Court Judge William Herauf.
Haffner is a reporter at the Press. Contact him at 701-456-1206 or tweet him at ahaffner1.

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