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Mall owner’s attorneys deny breach of contract

By Kevin O’Brien

Responding to a lawsuit filed by the city of Abbotsford, attorneys for the owner of East Town Mall are denying that their client has breached a 2010 agreement that provided him with $100,000 in development incentives. Attorneys Scott Swid and Benjamin Kraukramer filed the response in Marathon County Circuit on Oct. 11 on behalf of Lon Waldinger and Chelt Development, owner of the mall.

The six-page answer to the city’s civil complaint, filed in September, claims that Waldinger is “current as to any terms of payment” set forth in the agreement, which offered a $100,000 loan in exchange for several improvements being made to the mall.

Of the five “required improvements” included in the agreement, only one of them was completed — construction of a new space on the east side of the mall meant for a hardware store that never materialized.

Waldinger’s attorneys, however, argue that “all of the ‘required improvements’ were not left incomplete,” as alleged by the city. They also claim that the improve- provements were only “potential,” and that the city “unilaterally converted” them to required improvements when drafting the developer’s agreement.

The attorneys assert that the city’s unilateral modifications to the contract were done over the objections of their client.

The city, according to the attorneys, has “failed to act in good faith as to the performance of the development agreement,” and is itself in breach of the agreement.

The 2010 agreement hinges on taxincremental financing (TIF), which allows Waldinger to use the extra property taxes generated by improvements to the mall to pay back the loan.

Under the terms of the agreement, if Waldinger failed to make the agreed upon improvements on time, he was required to either pay the city $50,000 or provide a “tax increment shortfall payment,” which would make up for any anticipated tax revenue that never materialized.

The mall’s assessed value increased by $87,600 from 2009 to 2010 after the new east-end store space was built. That generated an extra $1,869 in property taxes that year, and, since then, taxes collected on the addition have totaled about $18,000.

Waldinger’s attorneys assert that he has “made over $800,000 in renovations and improvements to the property” since the agreement was enacted in 2010, though they do not specify what those improvements were.

Meanwhile, the city has been making annual payments of about $12,600 on the $100,000 loan it got from the Wisconsin Commissioner of Public Lands in 2010. After the last payment is made in March of next year, the city will have paid $126,384 with interest added in.

Waldinger was also required to obtain an irrevocable line of credit and submit it to the city by Jan. 1, 2016. The city’s lawsuit claims that this was never done, but Waldinger’s attorney say it was.

The lawsuit states that the city has demanded payment from Waldinger, pursuant to the terms of the agreement, but he has “failed and/or refused to make payment of the amounts due.”

The city is seeking reimbursement of the full loan amount, $100,000, plus a $50,000 “penalty,” included in the original agreement as a remedy for Waldinger defaulting on the terms.

On top of the $150,000, the city is also seeking 12 percent interest charged from when the original amounts were owed.

The city is also seeking an injunction to prevent Waldinger from selling, leasing or transferring the mall property without written consent of the city, which was also a provision of the 2010 agreement.

Waldinger’s attorneys deny that the contract prevents their client from selling the property. A section of the contract does state that the “developer may not sell, transfer, or lease any of the property” until the improvements are done, so it is unclear why the attorneys believe that provision does not apply.

As part of their defense, Waldinger’s attorneys assert that the city has “failed to state a claim upon which relief can be granted under Wisconsin law,” and also that the statute of limitations bars any breach of contract claim.

The attorneys also claim the term “developer” is ambiguous in the city’s agreement, and that any personal claim against Waldinger would be “ineffective.”

In seeking dismissal of the city’s lawsuit, the attorneys also seem to allude to the declining market conditions facing the mall, which recently lost ShopKo and several other tenants.

“Changes in the circumstances surrounding the property have rendered specific performance frustrative of the purpose of the contract,” the filing states.

Waldinger’s attorney’s have filed a demand for a 12-person jury trial, but no further court dates have been scheduled at this point.