Miell’s property empire to be liquidated

Posted on Oct 12, 2009 by David DeWitte.

It looks like Robert Miell, the onetime rental property kingpin of Cedar Rapids, will be losing his $69 million real estate empire.

Miell’s bankruptcy was converted from a Chapter 11 (reorganization) case to a Chapter 7 (liquidation) case by  Judge Paul Kilburg in U.S. Bankruptcy Court for the Northern District of Iowa on Friday.

Miell, awaiting sentencing for insurance fraud, had objected to the conversion of the case. Miell argued that his real estate business was losing money because of  high expenses racked up by a court-appointed trustee, Renee Hanrahan.

Hanrahan supported Miell’s request to keep the case in Chapter 11, but for a different reason. She said Miell had plenty of equity in the properties, and she hadn’t had enough time to see if the rental business could be made profitable.

The judge wasn’t having any of it.

Judge Kilburg agreed with Miell’s lenders that he had failed to pay real estate taxes on some of the properties even before they were placed under trusteeship, and that some of the properties had been left without insurance.

“The record presented establishes debtor’s estate is in considerable disarray,” the judge wrote in his opinion.

Although the trustee’s expenses have been high, Kilburg said that was partly due to the fact that Miell lacked financial records and had left the rental properties in poor condition.

The bankruptcy case is “inextricably intertwined” with Miell’s recent conviction on insurance fraud charges, the judge wrote.

“He has shown an inability to candidly account to his lenders in the past,” Kilburg wrote. He said the  lenders have a substantial financial interest in the properties, and to allow the debtor to utilize the money himself from prison, or through inexperienced property managers in his absences, is not reasonable.

Miell had accumulated 460 properties with 850 rental units, valued at about $69 million. He owed lenders between $45 million and $50 million.

Heritage Bank of Marion and United States Bankruptcy Trustee Habbo Fokkena had filed motions to convert the case to a liquidation. Heritage Bank has 42 mortgages on 65 parcels of Miell’s rental property.

About 15 lenders in all joined in the motion to convert the case to a liquidation. They included Luana Savings Bank, BankIowa, Farmers State Bank, Collins Community Credit Union, Linn County State Bank, University of Iowa Community Credit Union, American Family Mutual Insurance Company, State Farm Bank F.S.B., Bankers Trust Co., Hills Bank & Trust Co., First Federal Credit Union, Bank Iowa and Guaranty Bank & Trust Co.

One of the key points raised by the banks was  low 68 percent occupancy rate of the Miell’s properties, which may have been due to the poor condition of the rental units. The average occupancy rate in Cedar Rapids rental properties is about 90 percent, the judge’s ruling said.

One property manager was cited in the judge’s ruling as saying that some properties had cockroaches, fleas and other pests. Another testified that when he inspected a Miell apartment building he inspected on Blairs Ferry Road, he found drug dealing and prostitution.