Lake Lawn still has time to recover
Employees given notice, closing date in sight
October 13, 2010 | 09:12 AM
Delavan — If the owners of Lake Lawn Resort can't find new investors or a fresh infusion of funds in the next six weeks, it's likely the 132-year-old hotel and spa will close by Nov. 30, or soon thereafter.
Such a closing would send shockwaves through the local economy.
According to the state Department of Workforce Development website, a 60-day layoff notice was sent to the 126 full-time resort employees at the resort on Oct. 8. Under Wisconsin's WARN (Worker Adjustment and Retraining Notification) Act, the hotel has to register when and how many employees will be laid off.
The 60-day notice is for the period ending Dec. 8.
The resort employs up to 320 full- and part-time workers. Part-time workers are not covered by the state's layoff notice law.
The notice came one day after Anchor Bank of Madison put down the sole bid on the property at a sheriff's sale in Elkhorn.
At $19.97 million, it's probably the highest bid ever entered at a sheriff's sale in Walworth County, said Deputy Brian Schmieden, a process server who has nine years experience conducting sheriff's sales.
The second highest bid was last year's $17 million for the Hillmoor Golf Course property in Lake Geneva, said Walworth County Sheriff David Graves. The amount of the bid doesn't mean much to the Sheriff's Department, he said. By state law, the department gets $150 per sale, no matter how large the bids, Graves said.
Nearly two dozen of the interested, curious and invested were in the Walworth County Law Enforcement Center lobby when the bids were called. But when Deputy Mark Drews, who handled the sale for the county, asked if anyone in the crowd represented Lake Lawn, no one stepped forward.
Eight properties were up for sale Oct. 7. Lake Lawn's bid was called first, and after the anticlimatic conclusion, most of those observers left.
Anchor Bank attorney John M. Van Lieshout delivered the bank's bid. Later, Van Lieshout said that the bank does not own the property, yet. The case has to go back to Racine County Court, where a judge will determine whether the bid price is fair and how the money will be distributed. Van Lieshout said the bank has four to six weeks to seek the judge's approval of the sale.
Dale Thorpe, attorney for the hotel's condominium owners, said the bank has assured all parties that they won't seek to have the sale approved until Nov. 30 at the latest.
"This is to allow the resort owners every opportunity to work out a solution," Thorpe said. "I am told there are efforts to work out a solution."
Thorpe's clients are investors who bought into Lake Lawn's condo-tel concept, buying one or more rooms on the expectation that they would get a return on their investments through the room rentals.
If the hotel were to close, these investors would find themselves owning rooms in a closed hotel.
Closing the resort would have an immediate effect on the city of Delavan as well. City Administrator Joe Salitros said the attorney for Lake Lawn reported that the resort contributed about $400,000 last year alone in room taxes.
The loss of that income would make an already challenging budget year, even more challenging, Salitros said.
Earlies this year, the Walworth County Treasurer's Office reported earlier this year that the resort owed the county $792,716 in taxes.
Closing Lake Lawn would also be a blow to local tourism.
"It's very sad. It will be sad for the county to lose such a magnificent piece of property," said Kathy Seeberg, executive director of the Walworth County Visitors Bureau.
A recently-released state Department of Tourism survey showed that tourism spending in Walworth County fell 11 percent in 2009, compared to 2008. Visitors to Walworth County spent $370.51 million last year, down from $416.96 million in 2008, the report said.
Statewide, Walworth County ranks seventh in tourism spending. Many of the state's counties also saw drops in tourism spending, the report stated.
In March, Anchor Bank won a $34.4 million foreclosure judgment against the property.
The Milwaukee Business Journal website said the property's receiver recently sent letters to reservation holders at Lake Lawn saying that reservations after Nov. 30 probably won't be honored.
According to the Lake Lawn website, the Delavan resort, located on the shores of Delavan Lake, with a main entrances on Highway 50, was founded in 1878. The resort has 281 guest rooms, a 120-slip marina, an 18-hole golf course and a 4,400-foot private air strip
The resort was purchased by Delavan Resort Holdings in 2004.
In early 2005, resort owners approached the city of Delavan with a $390 million conceptual plan to redevelop the property, which the city later approved.
The resort completed about 30 million in upgrades to its 222 guest rooms by 2006.
In August 2009, Anchor Bank of Madison filed for $51.9 million foreclosure action against Delavan Resort Holdings and Lake Lawn. The case was moved to Racine County when Walworth County judges recused themselves from the case.
In March 2010, Racine County Judge Richard Kreul ruled in favor of foreclosure against Lake Lawn.