Miell’s real estate property empire to be liquidated

The 460-property, $69 million, real estate empire of embattled Cedar Rapids landlord Robert Miell will be liquidated in bankruptcy.

A judge's order issued Friday in U.S. Bankruptcy Court in Cedar Rapids ends Miell's hopes of keeping his properties under his own control and out of the hands of lenders.

Bankruptcy Judge Paul Kilburg ordered Miell's bankruptcy case converted from a Chapter 11 financial reorganization case to a Chapter 7 liquidation case.

The order comes just as Miell awaits sentencing in U.S. District Court on counts of tax fraud, 18 counts of mail fraud and two counts of perjury. The charges stem from fraudulently reporting more than $336,000 in storm damages on 145 properties to American Family Insurance.

Miell objected to motions to convert the case by U.S. Bankruptcy Trustee Habbo Fokkena and Heritage Bank, which has 42 mortgages on 65 Miell properties. In motions filed against the conversion, Miell said the decisions by court-appointed trustee Renee Hanrahan generated significant additional administrative expenses and reduced rental income. He claimed to have had plenty of equity in the properties and that the rental business could be profitable if it was run properly.

Hanrahan sided with Miell. She said much of the equity Miell had in the business could be lost to creditors if the case was converted to Chapter 7. She also said it was too early to tell if liquidation was necessary.

The lenders were lined up squarely against Miell, however. They presented evidence that Miell had failed to pay real estate taxes on the properties when due, forcing them to pay the taxes or redeem tax sale certificates to protect their financial interests in the properties. State Farm Bank had provided Miell with $580,395 in “protective advances” for real estate taxes, and the University of Iowa Community Credit Union had paid $115,270 in real estate taxes.

Lenders also testified that 50 percent of Miell's properties were without property insurance at one point. State Farm Bank “force placed” insurance on 115 of the 132 properties in its portfolio because it lacked evidence the properties were insured.

Lenders also submitted testimony that many properties were in bad repair, including water damage and mold in some rental units because leaky roofs or leaking plumbing had not been repaired. One property manager working for the trustee testified that 52 apartments he manages will cost about $3,000 per unit to correct problems ranging from inoperable appliances to broken plumbing.

Nearly a third of the rentals were not occupied, lenders claimed.

The judge wrote he was left with “the abiding conclusion that (Miell's) financial condition is in such a state that losses are escalating and the value of the overall estate is rapidly decreasing.”

Miell owes lenders $45 million to $50 million, and “has shown an inability to candidly account to his lenders in the past,” he wrote.