Edwardsville’s Hard Rock Hotel falls on hard times as fraud allegations upend project
The Hard Rock Hotel project in Edwardsville, a development worth more than $70 million for which leaders of this western Wyandotte County town had high hopes, faces an uncertain future after its lender abruptly failed to come up with money for a construction loan.
The developer of the Hard Rock-themed hotel project, which consisted of a 241-room hotel, convention and entertainment centers and retail near Interstate 70 and 110th Street near the Kansas Speedway, accused North Carolina-based real estate finance firm Altos Groups of fraud and misrepresentation in a lawsuit filed last month.
One10 Hotel HRKC LLC, the Hard Rock Hotel developer, is also suing Kansas City lawyer James Neeld and his St. Louis-based law firm Sandberg, Phoenix & Von Gontard, which represented Altos Group.
The lawsuit filed in Wyandotte County District Court claims Altos Group said it could provide a $48 million loan to help the project along. Altos Group, according to the lawsuit, then required the developer to pay a $13.8 million down payment. And when it came time for Altos Group to provide the loan proceeds, the firm had to admit it had no money.
Now construction has stalled and the development is tied up in three different lawsuits in three different states, putting brakes on a project that city leaders hoped would put Edwardsville on the map as a destination among the various attractions already built in western Wyandotte County.
“I’ve felt ever since the early ’90s it was a prime area for development and it really was and it still is,” said Edwardsville Mayor John “Tiny” McTaggart. “It’s just a matter of how this thing unfolds is anyone’s guess. Will the developer prevail in the lawsuit against the investor who bailed? Who knows?”
Edwardsville last year issued more than $23 million in bonds to support the project. The bonds would be repaid mostly by the city’s hotel guest tax as well as incremental increases in property taxes generated by the project. But the trustee for those bonds, UMB Bank, is refusing to disperse the bond proceeds, saying in May that the developer is in default, according to court records.
Top Altos Group officials did not respond to a phone message and emails seeking comment about One10’s allegations. One10’s manager is Jon Monson, a Minnesota developer.
The allegations against Altos Group in Edwardsville fits a recent pattern, according to court records reviewed by The Star.
Kansas City project
Altos Group faces similar claims in a separate hotel project in downtown Kansas City, Missouri, that the firm also allegedly failed to fund.
A Colorado developer took Altos Group to federal court last month with a lawsuit that says Altos Group promised but failed to deliver on a loan to support a Hyatt House hotel at 900 Broadway.
In that lawsuit, Pedersen Development Co. alleges it reached an agreement on Oct. 9, 2019, for Altos Group to provide a nearly $25 million loan for the $36 million extended-stay hotel project.
Pedersen Development Co. put a down payment of $927,027 with Altos Group and had its general contractor begin work on the 13-story hotel project. But by the time the contractor did about $3.7 million worth of construction work on the hotel and sent the invoices for payment, Altos Group said its source of funding had disappeared, according to the lawsuit.
Altos Group’s response to the Hyatt House lawsuit was due on Monday, but no filing was listed in the federal court docket.
Craig Blockwick, a Colorado lawyer representing hotel developer 900 Broadway KC Development Company LLC, said because no response has been filed by Altos Group he planned to ask the judge for a default judgment, meaning the judge rules in the plaintiff’s favor and accepts the allegations and losses suffered as true.
“We went into this deal with the expectation they would fully fund this project and they haven’t,” Blockwick said. “This and other projects.”
On May 28, a Utah judge entered a default judgment of $3.9 million in favor of A&B Kenab Hotels LLC, which sued Altos Group and its managing partners, David Ingram and Lidia Ingram. The judgment resolved a lawsuit claiming Altos Group agreed to provide a $9 million loan for a SpringHill Suites Hotel in Kenab, Utah, before refusing to pay the general contractor and telling the developer that Altos Group would not fund the loan.
In the Utah case, the hotel developers sent Altos Group $1.5 million that was supposed to go into a restricted account but has since appeared to be commingled into other Altos accounts “and converted by Defendants for personal and other use,” according to court records.
The Hard Rock Hotel developers in Edwardsville plan to ask a Wyandotte County judge for a default judgment after Altos Group did not meet a Monday deadline to respond to that lawsuit, according to One10 Hotel’s lawyer.
John M. Edgar, a lawyer with The Edgar Law Firm, said on Tuesday that One10 Hotel hopes to find another funding source to complete the project.
“Our client is very hopeful, they believe in the project and they told us they hope very much...to see it forward to a successful conclusion,” Edgar said.
A Hard Rock in Edwardsville
Edwardsville, a town of about 4,500 that sits some 17 miles west of Kansas City, is a mostly residential enclave. Development-wise, it’s best known for industrial parks like a large one belonging to FedEx on the south end of town along the Kansas River.
The city saw an opportunity to spruce up its undeveloped north end and capture some of the consumer traffic that flocks to the retail and entertainment destinations across Interstate 70 in Kansas City, Kansas, such as Hollywood Casino, Village West and Children’s Mercy Park.
It was with some fanfare, then, in 2018 when Edwardsville approved plans for what it would call Village South, at the southeast corner of I-70 and 110th Street. The project would mix a hotel, convention center, entertainment concept and some surrounding restaurants and retail.
Edwardsville approved a series of bonds all worth more than $23 million to provide upfront money to help the development along, which would be repaid over time with hotel guest taxes and new property taxes generated by the Village South project.
The Hard Rock rock ‘n’ roll theme, the first of its kind in the Kansas City area, would lend Village South added prominence.
In March 2019, One10 Hotel’s partners had a conference call with Altos Group to discuss financing for the Hard Rock project.
What follows is One10’s account of how things went sideways in Edwardsville:
David Ingram, Altos Group’s founder, told the One10 partners on that phone call that he had worked on Hard Rock-branded projects before and enjoyed a good relationship with the company. Ingram, who court records say had a background in the residential mortgage business before starting Altos Group, also talked about his relationships with JPMorgan Chase Bank and Bank of America and had large lines of credit with both banks. (A spokeswoman with JP Morgan said she could not confirm a banking relationship.)
Ingram said he could offer a 30-year loan at 4.25% interest, terms that pleased the One10 Hotel partners.
By the summer of 2019, One10 agreed to a loan commitment with Altos Group with the understanding that Altos Group could get funding from a major bank. Under the terms of the deal, One10 would make a $13.8 million down payment deposit to be held in escrow at closing, plus another $40,000 “commitment fee” paid to Altos Group.
Where’s the proof?
By September 2019, Ingram was asked to provide proof that Altos Group had the funding lined up. Ingram, according to the lawsuit, declined to verify the loan because he explained the credit hadn’t yet been extended.
A month later, Neeld, the lawyer representing Altos, said in a conference call that JPMorgan would extend the credit a few weeks after the down payment deposit was received.
According to the lawsuit, Edwardsville officials appeared to fret about the lack of a loan verification as the closing date approached. The city’s bond trustee also balked at putting bond proceeds in an account it didn’t control, which was another part of Altos Group’s loan commitment.
Edwardsville city administrator Michael Webb, to whom McTaggart referred questions about the particulars of the Hard Rock Hotel project, did not return a phone message.
When pressed by Edwardsville’s bond trustee, Neeld said “you either find a way to make the deposit at JPMorgan or you can find yourself another lender.” Reached by phone, Neeld declined to discuss the lawsuit’s allegations and referred questions to Sandberg Phoenix general counsel Ken Bean, who did not respond to a phone call or an email.
Neeld’s explanations worked for One10 members, but Edwardsville’s bond trustee still didn’t like the idea of putting bond proceeds into a third-party account. So One10 went out to borrow money for the $13.8 million deposit, including $7.7 million from a Minnesota bank.
The developer and Altos Group signed the loan agreement on Oct. 30, 2019.
On Jan. 22, One10 made its first request for loan funds. Neeld and others from Altos Group kept saying the funds were on their way, but never showed up despite several requests.
By Feb. 24, One10’s Monson called Altos Group. That day, Altos Group said that JPMorgan was no longer funding the loan. Instead, the money would come from “family offices” in California.
On March 6, Altos Group said it could no longer fund the loan, putting a stop to construction at Village South.
One10 Hotel demanded the return of its $13.8 million deposit. It received $10.8 million of it and its lawsuit says there are signs that Altos Group commingled the remaining $3 million in other accounts.
Edgar said a Wyandotte County judge has ordered David Ingram, who called into a court hearing, to send the rest of the funds.
“He (Ingram) made a lot of statements, I can’t tell you that any of them made any sense or were significant,” Edgar said. “He claimed he still had the money. The judge ordered him to deliver it. And he still hasn’t delivered it.”
One10 Hotel is also suing UMB Bank, the bond trustee, in Jackson County Circuit Court in Missouri. That lawsuit demands that UMB Bank make distributions to One10 Hotel from the bond proceeds.
Meanwhile, UMB has filed a lawsuit in Hennepin County, Minnesota, asking a judge to confirm that the developer did default on the bonds and that the bank is not required to disburse any bond proceeds.
This story was originally published July 8, 2020 at 12:06 PM.
