Banking & Finance  January 29, 2010

Steele’s bankruptcy winds down

FORT COLLINS – After nine years of legal maneuvering in bankruptcy court, Steele’s Markets – once an icon of Northern Colorado business – is finally wrapping up its obligations to its debtors, paying more than 300 creditors only pennies on the dollar in most cases.

Steele’s Markets LLC, which filed for Chapter 11 bankruptcy protection in February 2001, was one of the region’s best known and successful grocery chains. Just prior to its bankruptcy, Steele’s operated six stores in Fort Collins, Windsor, Fort Morgan and Niwot and employed about 600.

The family-owned supermarket chain prospered for more than 60 years before foundering in late 2000. Store owners Russ and Carol Ann Kates at first believed a Chapter 11 reorganization might save a portion of the operation, but by October of 2001 the company’s creditors decided the reorganization plan would not work, and Steele’s was ordered to liquidate its assets and pay off its debts under Chapter 7 bankruptcy rules.

Russ Kates said he hadn’t given much thought to the bankruptcy since 2001. “It was over in 2001 for us,” he said. “Once the courts took over and the (bankruptcy) trustee took over, we were out of the picture.”

In December 2009, bankruptcy trustee Jeffrey Weinman presented a final report of approved claimants to U.S. Bankruptcy Court Judge Sidney Brooks. Checks with final payments to claimants have since been sent to those on the final list.

Many of the creditors receiving checks are former store employees, suppliers and others caught up in the bankruptcy action. Burke Cleaners, which had cleaning outlets in some of the Steele’s stores, filed a claim for $14,016.03 and received a final check for $759.12.

“I guess I’m kind of disappointed that it took almost 10 years, and we only got about 5 percent of what we originally wanted, but it is something,´ said Tim Burke, owner. “But we had definitely moved on and kind of expected nothing.”

Burke said the bankruptcy did teach him a lesson. “We didn’t collect our money monthly as we should have,” he said. “We do now.”

Larry Stroud, a real estate agent who was owed $61,600 in commissions on the sale of Steele’s downtown store, ultimately received just $3,335. Stroud said he had given up on getting anything from the bankruptcy.

“I really didn’t have an expectation because I hadn’t been through this before,” Stroud said. “I wasn’t really expecting anything, so I guess it’s good news. But my expectation was there wouldn’t be anything.”

Final report

In his final report, trustee Weinman said claims of unsecured creditors totaling more than $6.4 million “have been allowed and will be paid pro rata only after allowed administrative and priority claims have been paid in full.”

At the time of Steele’s initial Chapter 11 bankruptcy filing in February 2001, the company reported $16.9 million in assets and $11.3 million in liabilities. But by the fall of 200 — when the court ordered it to liquidate under Chapter 7 — Steele’s had run up a total debt of $21.5 million.

Weinman did not respond to several telephone calls or e-mails from the Business Report seeking direct comment on the bankruptcy. Most unsecured creditors received 6 percent or less of their claims, according to court documents.

Growing area competition from national supermarket chains and natural food stores contributed to Steele’s downfall. Steele’s operation was known for its many charitable contributions to the Northern Colorado community and for its emphasis on hiring special needs workers.

About one year after Steele’s was ordered to liquidate, former owners Russ and Carol Ann Kates along with Dave and Mary McAndrews, founders of Greeley-based McAndrews Cattle Co., announced a plan to open Steele’s Fresh Market store in November 2002.

Plans for the new store, to be located in a portion of the former Steele’s grocery at 1001 E. Harmony Rd., included a focus on meats, dairy products and bakery goods. However, that venture closed in March 2003 after just four months.

Two of the three former Steele’s locations in Fort Collins have had new leases on life since the bankruptcy. The former Steele’s building at 1001 E. Harmony Rd. is now filled with several businesses, including an Ace Hardware, Half Moon Bay Coffee Company, Fiona’s Deli, Reader’s Cove and the UPS Store. The building was conveyed to Harmony Market LLC, an investment group represented by Fort Collins attorney Brad March. A search of records with the Colorado Secretary of State’s office identified the Don and May Wilkins Charitable Trust as the initial manager of Harmony Market LLC in its 1999 articles of organization.

In 2005, Columbine Health Systems purchased the former Steele’s grocery at 802 W. Drake Road from its owner, Minneapolis-based grocery wholesaler Nash Finch, for $4.2 million. The deal also included 6.5 acres of surrounding property.

Columbine, which has health care facilities adjacent to the property, has redeveloped the Drake Centre building into a cafe, community meeting place, supply distribution center and as a site for several of its offices. Yvonne Myers, a Columbine spokeswoman, said it made sense for the company to purchase the site.

“It sat open for four years and nothing happened,” she said. “Now that we have it, we don’t know what we did before.”

Steele’s former downtown store location, 309 W. Mountain Ave., sold in May 2001 for $2.34 million and has been eyed for redevelopment for the last nine years but remains closed, often covered with graffiti. The original purchaser, Mountain Avenue LLC, announced in September 2001 a plan to clear the site and build a $55 million condominium project.

But the plan involved constructing two high-rise buildings and drew criticism from neighbors, including St. Joseph Catholic Church, because of fears of the proposed structure leaving surrounding buildings in perpetual shade.

In late 2004, St. Joseph’s Catholic Church was reportedly studying the possibility of buying the site for parking and possible other uses. But that idea went nowhere, and the site is currently owned by Bohemian Mountain LLC, a subsidiary of Bohemian Cos.

Joe Zimlich, CEO of Bohemian Cos., said the Fort Collins-based entity – owned by businesswoman Pat Stryker — plans to “de-construct” the 17,000-square-foot building and redevelop the two-acre site. He said it was “too early to say” what might be built on the site.

Zimlich said plans call for the building to be removed this spring but he did not expect construction on any new project to begin this year. “We’re going to take it down but we don’t have any plans finalized for what we’ll do with the site,” he said.

City Manager Darin Atteberry said he was happy to hear of plans to redevelop the site after nearly nine years of sitting empty. “I can tell you that it’s great news that the Bohemians are looking at a deconstruction effort,” he said. “I think that’s great for the community.”

Atteberry said he’s had “lots of questions” about the site, which would appear to have tremendous development potential.

“It’s just an optimal site,” he said. “It’s a key site in the downtown along the Mason corridor. I think it’s really exciting.”

FORT COLLINS – After nine years of legal maneuvering in bankruptcy court, Steele’s Markets – once an icon of Northern Colorado business – is finally wrapping up its obligations to its debtors, paying more than 300 creditors only pennies on the dollar in most cases.

Steele’s Markets LLC, which filed for Chapter 11 bankruptcy protection in February 2001, was one of the region’s best known and successful grocery chains. Just prior to its bankruptcy, Steele’s operated six stores in Fort Collins, Windsor, Fort Morgan and Niwot and employed about 600.

The family-owned supermarket chain prospered for more than 60…

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