Newly named Union House construction resumed

By Bob Steenson, bsteenson@charlescitypress.com

Construction has resumed on the McQuillen Place project in downtown Charles City this week, under a new owner, with a new name for the building and with a promise that the project will be completed — possibly for the apartments by this spring.

Kurt Herbrechtsmeyer, president and CEO of First Security Bank and Trust and manager of Four Keys LLC, announced Monday that crews from Dean Snyder Construction are beginning a top-to-bottom renovation of the 45,000-square-foot residential and commercial project.

He also announced that the building will now be known as the Union House, after a historic building that once sat at the same location.

While more than 20 lawsuits have been filed regarding various aspects of the project since construction stopped in 2017, most of them still pending, Herbrechtsmeyer said work can no longer wait on the building.

“For whatever reason, there’s a roof over there that was supposed to last for decades that wasn’t built correctly, because there’s moisture in the insulation,” he told the Press.

“The clock tower, if you were up there to see it, looks like it’s sitting on a pillow,” he said. It has sunk into the roof so water is pooling around the base and seeping into the apartment below it.

“The immediate question for us is, are we going to let that sit for a couple of years and wait for the legal work to go through? They’re talking about two to three years,” Herbrechtsmeyer said about the lawsuits timeframe.

“If we do nothing, then there’s nothing to argue over, because there’s not a building there, or there’s a building there that doesn’t have any use to anybody. … It’s not going to last. It’s just going to deteriorate,” he said.

“Our plan is to go forward and do the finish work in the apartments — get the appliances and cabinets installed, the flooring, and get those open, with the idea being that the building can be occupied at least partially or hopefully completely,” he said.

He said there is a possibility the apartments could be ready for occupancy by the spring.

“The timeframe that Dean Snyder gave us was late spring,” he said. “Now that was several weeks ago. I don’t want to put them under the gun, but we’d certainly like to get the certificate of occupancy in the late spring or early part of the summer at least.”

The most important thing now is to get the roof fixed so there’s no more damage, he said.

“We’ve had a number of professionals go over there and look this over. We feel confident we know what the problem is, that it’s correctable,” he said.

The walls of the arcade — an open area in part of the building — will be demolished and replaced with materials suited for exterior walls, he said. Weather-related damage will be removed, repaired or replaced as needed.

Fire mitigation work required by city code will be also be completed between the retail and residential spaces.

Four Keys LLC purchased the McQuillen Place property in April through a bankruptcy proceeding. That bankruptcy decision is being appealed by the original owner and project developer, Charles City attorney Charley Thomson, who named the project after his mother’s family name. Thomson’s middle name is also McQuillen.

Four Keys is a company formed by Cedar Valley Bankshares, the bank holding company that owns First Security Bank and Trust. All three companies are owned by essentially the same group of families.

Lawsuits have been filed over the property in Floyd County District Court, U.S. Bankruptcy Court and U.S. District Court, by First Security to foreclose on the construction mortgage, over various aspects of the bankruptcy proceedings, by Thomson against the bank and individual directors, by various other entities associated with Thomson, and by the bank against those entities as well.

Herbrechtsmeyer said the construction crews will keep the structure’s architectural and design features intact, while addressing several issues including replacing the roof and rebuilding the support structure for the clock tower, which will require removing the clock tower temporarily.

The design of the building itself has been the subject of several lawsuits involving the architect, Cornice and Rose, which is owned by James Gray, who owned 40% of the equity security in McQuillen Place Co. before the bankruptcy decisions.

Cornice and Rose has argued that the the design of the building covered by copyright law “extends to any embodiment of the building design, including the building itself.”

In a press release issued by Cornice and Rose on Oct. 30, Gray said the copyright registration on the architectural design had been issued by the Library of Congress.

“Certification of copyright registration makes the copyright owner eligible for statutory damages, attorney fees and costs of suit in the event of infringement,” Gray said in a press release.

Herbrechtsmeyer said he didn’t want to discuss the specific lawsuits still outstanding on the project, or what might happen if some of them eventually were decided against the bank or Four Keys.

“We have talked with attorneys about what the risks are, and, yeah, there’s risk that we do this and something happens. Any of a variety of things could happen,” he said.

“We’ve decided we’re going to go forward. There’s some risk in that and we’ve looked at that, and we think it’s better to go forward and get this thing finished, because if we wait for the lawsuits there’s not going to be a building there to fight over,” he said.

He declined to discuss the cost to complete the project, but allowed that it would be “significant.’

A press release issued by Union House Monday said, “When complete, Union House will be a center of life in downtown Charles City. It will be something all Charles City residents can take pride in, and it will make 123 Main Street one of the most desirable home addresses in North Iowa.”

“All of us who live in and around Charles City have considered this to be an integral project for the city’s future,” said Herbrechtsmeyer. “It’s going to take a lot of work, but we’re excited to finally move it across the finish line.”

Photos and reports on the renovation progress will be posted to the Union House Facebook page, www.facebook.com/UnionHouseCC.

The McQuillen Place project, planned to offer 33 residential apartments on the second and third floors and retail or commercial space on the ground floor, was announced in 2013. A majority of the construction had been completed, but in 2017 work stalled for a variety of reasons.

Since then the project has been entangled in a legal labyrinth of lawsuits and counter suits in state and federal courts that began with the filing of foreclosure by First Security Bank against McQuillen Place Co LLC for alleged failure to meet the terms of the construction mortgage.

McQuillen Place Co. LLC then filed Chapter 11 bankruptcy, which the judge in the case converted to Chapter 7 then appointed a trustee to oversee selling the assets of McQuillen Place Co. LLC.

In April the bankruptcy judge ordered that the trustee could sell the assets. The Four Keys LLC company was created and purchased the project assets.

The bankruptcy decision has been appealed, and many other lawsuits remain to be settled, including the copyright claims on the design of the building, and charges leveled by Thomson that the bank and individual bank directors acted in bad faith against McQuillen Place Co.