Falls Event Center Should Convert to Chapter 7 Liquidation

The Falls Event Center | McMinnville Wedding Venue - The Lodge

The Falls Event Centers (TFEC) has released their monthly finances, albeit very late. Now that the holidays are over, I have taken the time to go over them in detail, and there are continued dour implications not only for investors and creditors, but also the museum and the local community here in McMinnville. While their numbers may show that they are losing less money over last month (-$430,000), this reduction appears to be largely an artifact of the bankruptcy process. If you add in other items they are not paying in post-petition taxes/interest, they actually lost once again about another million dollars this month. In addition since they filed in July, they still have accounts payable of about $1 million and official records show that negative equity increased by another $1,346,689 and now stands at a negative $56,186,286 (a loss of over $8.5 million, or $1.888 million a month since the July filing this year).

What I found most alarming in their filing, however, is that based on recent real estate short sales they only received 40% of the stated value for undeveloped TFEC ground in Texas, and only 50% of stated value for a deed in lieu of foreclosure in TFEC in Elk Grove California, which is an operating center. Poor negotiating skills aside, the result of these short sales is that the true shareholder negative equity could quickly grow another $28 - $40 million with a total NEGATIVE value range of $84 - $96 million. Not only have investors been totally wiped out at this point, but so have unsecured creditors, all event deposits (even those made since the filing that are priorities), and even employee wages are seriously at risk, not to mention that secured lien holders may not even receive 100% of monies owed after past property taxes are paid (property taxes are in the multi-million dollar range). On page 24 of recent monthly operating report (doc 251) the new Trustee clearly states that they are re-examining the numbers reported which “may change significantly and materially,” and that “the book value of the real estate reported by the Debtor may be overstated.” The new Court-appointed Trustee, Michael Thompson, will likely have no choice but to change the filing to a chapter 7 liquidation soon, especially since in January/February they may start to run out of cash to even pay the trustee, lawyers and advisors. The Water Park here in McMinnville, which represents about half (if not more) of TFEC revenues nationwide, can no longer subsidize the rest of the organization with the onset of Winter.

While the local paper, the News-Register, and Evergreen Aviation & Space Museum would have you believe that the Museum is not at risk, that is incorrect. The Evergreen site, including the Space Building, Wings & Waves Waterpark ,Lodge, and hotel site must be sold. Such a sale would come with a change in landlords. The Museum has not only lost the $70,000 per month “donations” from Steve Down (almost $1 million in total lost donations so far) and any future “donations”, but will also no longer be entitled to “free rent.” The lease the Museum signed with TFEC specifically does away with free rent and donations with a change in landlords. Any new landlord would likely require that the museum pay rent of at least $30-40,000 a month or even more based on what they already pay for the portion owned by George Schott ($50,000/month). That is a negative swing of $100,000-110,000/month in their budget needs. The Museum has no endowment, has failed to raise any significant money the last few years, and has a cost structure it can not afford. When taken together as a whole, these factors point to a likely eviction of the museum and foreclosure of their assets absent a miracle of some sort. Most of the planes on display are on loan and can be quickly taken back once this risk is made fully known. The only tangible asset the Museum has is the Spruce Goose, and that faces a secured position by Mr. Schott.

Though I am loathe to be the bearer of bad news, the McMinnville and Yamhill County community needs to face the fact that a new use will need to be found, and that the current Museum board and its director, who have failed at every turn, need to resign so that things can move on. The longer this untenable situation is allowed to persist, the worse things will be in the long run.

Here are the detailed finances for November: https://drive.google.com/file/d/1Ih7KQKU5EW1p3juIW0Dw-h6Iifo37-GE/view?usp=sharing