Story originally printed in the La Crosse Tribune or online at www.lacrossetribune.com

Published - Tuesday, December 27, 2005

Should taxpayers foot bill for Market Square problems?

By JOAN KENT / La Crosse Tribune

U.S. Bank wants La Crosse taxpayers to pay for fixing bricks falling from River Center Apartments, claiming the city failed to properly inspect the construction.

The bank, which is owed more than $5 million on the troubled downtown apartment project atop Market Square Ramp, is seeking reimbursement for the cost of correcting construction defects and code compliance.

The building’s manager would not reveal how much the receiver has spent on repairs, but said much work, including a new roof and repair of the brick exterior, remains to be done.

The city plans to deny U.S. Bank’s claim, said City Attorney Pat Houlihan. The bank will have six months to decide whether to sue the city.

U.S. Bank’s claim follows an inspection to determine why bricks are falling off the exterior walls of the apartments.

The thin bricks should be replaced rather than repaired, said Inspec of Milwaukee in a report about its inspection. The system is not allowing moisture to drain, and the bricks’ adhesive is deteriorating, but the extent of the problem cannot be known without removing the brick, the report says.

“The present thin brick cladding system is failing at random locations and will continuously need maintenance and hands-on inspections to provide a safe condition for the public,” the report says, advising installation of a new system that allows for proper drainage, longer life and less maintenance.

In August, Buffalo County Circuit Judge Judge James Duvall placed the River Center Plaza and Apartments in receivership and named Ogden & Co. Inc. of Milwaukee as receiver. Ogden has paid back taxes, sewer and water bills, and bills for secure parking at the Market Square Ramp owed by the developer.

In July and August, the city’s Inspection Department issued several orders to repair the apartments, and Duvall ordered Ogden to use rent income to first repair any safety hazards at the property.

Ogden installed scaffolding over the sidewalks on the Jay Street and King Street sides of the apartments to protect passersby from falling brick, said John Unnasch, Ogden’s site manager at the apartments. He said Ogden has done major roof repairs and repaired the heating system.

“We are proud of what we have done here,” Unnasch said, reporting that Ogden has increased occupancy from 85 percent to 98 percent expected by the end of January. “Our goal was to improve the quality of living. We have gone into each apartment. We are seeing the light at the end of the tunnel.”

Ogden is in phase one of repairing the building, finding out what’s wrong and what will work to fix it, said property manager Alita Burish. The roof has been temporarily repaired to eliminate leaks but must be replaced, but she said. She said Ogden has replaced furnaces and dealt with plumbing issues.

“There was a lot of deferred maintenance,” she said.

The city’s Inspection Department has relinquished responsibility for inspecting the apartments to the Wisconsin Department of Commerce, Safety and Buildings Division, citing a conflict of interest because of the city’s involvement in the foreclosure.

The transfer of responsibility is effective Dec. 30, and the state will inspect in January, said DOC spokesman Tony Hozeny.

The city has turned the bank’s claim over to its insurance company and is preparing its defense in case the bank sues, Houlihan said.

U.S. Bank, which is a trust for the loan, has obtained a default judgment against the apartments’ developer, Market Square Housing LLC. Its owners, James Harlan and Ian Waddell, have declared bankruptcy in California courts.

The last known address of Market Square Housing LLC was N1436 Runningen Lane, Stoddard, Wis., which is also the address where Conrad Seymour, spokesman for Market Square Housing, was served with the notice of the foreclosure.

The developer was to have paid $31,411 per month from May 2000 through March, 2010, on a $4.2 million loan, initially made with Morgan Guaranty Trust Co. of New York

According to court documents, the developer defaulted on the loan and owes a total of more than $5 million, including almost $4 million in unpaid principal.

U.S. Bank now is seeking a summary judgment against the city and its Redevelopment Authority.

Cause of brick failure in question

What’s with the bricks on the River Center apartments on the Market Center ramp?

The thin bricks that form the facade have been falling off for months. The apartments’ receiver has installed covered scaffolding to protect passersby. A company hired by the receiver to inspect the facade has advised removing all the bricks and applying a new system.

But no one has yet said what’s caused them to break away.

Gary Kessler, president of Universal Thin Brick Systems, which sold the bricks, backing and adhesive to Conrad Seymour of Market Square Housing LLC, the apartment developer, says he’s as puzzled as anyone.

“We’ve been in business 40 years, and we’ve never had a failure,” he said. “If it’s

done right, you have to take a hammer to get them off. We don’t want a black mark on us.”

Seymour did not return the Tribune’s phone calls.

There have been no problems with the brick on the ramp portion, constructed by Market & Johnson. That brick was set in concrete panels with reinforcing steel, which were then installed on the wall, said Gary Mader, vice president, Crest Precast Concrete of La Crescent, which did the work.

The report by Inspec says the adhesive on the bricks that have fallen was hard and dry, exhibiting “complete failure due to loss of adhesive elasticity.”

Joan Kent can be reached at (608) 791-8221 or jkent@lacrossetribune.com.