Facing stifling debt load, frequent vacancies, uneven cash flow; hotel closes–new buyer sought
There’s a hotel for sale in the heart of the Pelican, Lizzie and Lida lake country.
The doors are closed at the Inn at Dunvilla, pending sale to an as-yet-to-be-determined new owner.
The sooner a buyer is found, the better; not only for the unpaid creditors and the contractor, but numerous wedding parties that have booked rooms in the coming months.
The story of the Inn at Dunvilla is one of good intentions, hopes, and dreams; and the grim realities of business, finance and risk.
The Inn was widely heralded in the greater Pelican market area as a much-needed addition to the travel-tourism sector–with the decline in family operated resorts and fewer lodging options. The Grefsruds were enthusiastic promoters and full of optimism.
Opened fully in August of 2016, the 30-room hotel experienced solid weekend bookings much of its young history. The Inn’s proximity to the Barn at Dunvilla event center, with its steady schedule of weddings and events, ensured a revenue stream.
But it wasn’t enough.
High vacancies during most weekdays crippled the operation.
Unable to assemble a refinancing package to meet a deadline set in November, owners Jon and Linda Grefsrud surrendered the 30 unit hotel last week. The doors closed on Monday night, March 12. Minnesota National Bank is now the owner of the Inn, and once outstanding liens are cleared, the bank hopes to sell as quickly as possible.
“The property was voluntarily turned over to us,” said Donald Johns, chief executive officer of Minnesota National Bank, which is owed $439,842. “We had hoped it would be refinanced.”
A second creditor is Axia Contracting, which is owed $600,000–and has initiated a lien against the property.
Minnesota National and Axia are the two commercial creditors, sharing about $1.4 million. In order to sell the property, Minnesota National and Axia construction would need to be satisfied as part of the negotiation and transaction.
The $1.4 milion does not reflect the entire project cost, as the Grefsruds and other investors share additional debt believed to be about $2.5 to $3 million.
Details of this financial component were not readily available.
Minnesota National had little choice but to close the doors, straighten out the financial house, and hope to attract a buyer quickly, according to John.
“We’re a bank, not a hotel operator. We need to get through this as quickly as we can, get through the creditor issues, and get it out to the next entrepreneur,” said John. “We need a new owner operator to come in, hang their shingle and hit the ground running.”
Already, there have been a number of inquiries on buying the hotel property–though John acknowledged that any transaction could take months to finalize.
The closing of the hotel went public last week, when the Grefsruds entered a post on the Inn at Dunvilla social media site.
“After months of legal proceedings and negotiations, we are very sorry to report that The Inn at Dunvilla has been taken over by a new owner…who immediately and unexpectedly announced that they would be temporarily closing the hotel,” stated the post.
With the closure public, it opened the gates to numerous calls from wedding parties that have room bookings in coming months. John said he had received about 20 calls himself. The families have generally been understanding when they are informed of the situation, said John.
The Grefsruds posted a list of other regional hotel options and contact information; encouraging customers to make other lodging arrangements.
“We are saddened and heartbroken by this latest development…Please know that we tried endlessly to work out a solution, using all the resources at our disposal to keep The Inn under our ownership and operating as usual,” stated the notice from the Grefsruds. “Unfortunately, the other party involved was unable to work it out despite the negative impact it will have on our wonderful staff, loyal patrons and this community.”
For its part, Minnesota National worked with the Grefsruds in hopes of a positive outcome. The settlement reached late last fall set a 120 day deadline for the Grefsruds to refinance. When March 12 arrived, without a refinancing package, the Grefsruds essentially “turned the keys” over.
As far as Minnesota National’s position, John encouraged readers to take a fair and balanced view of the situation and the bank’s role.
“I just ask people in the community and market area to treat us fairly,” said John. In closing, the Grefsruds posted, “we thank you all for your enthusiasm, support and love through these years. We will continue to be advocates for Dunvilla, Pelican Rapids and this community.”