By Joe Friedrichs, The Shore Thing Podcast
When Bryce Campbell purchased Superior Shores in January 2020, his intention was to “conquer” it.
“Our entire career was founded on turning underperforming properties around, and Superior Shores was to be our ultimate challenge,” Campbell told this reporter just before midnight July 31.
In a rare interview with the press, Campbell said the recent events involving his ownership of two resorts on the North Shore “would appear to be right out of a movie.” Lutsen Resort in Cook County burned to the ground in February. More recently, the lone judge presiding over the North Shore stripped Campbell of his ability to operate and manage Superior Shores near Two Harbors.
“I have been absolutely crushed by the recent events,” Campbell said. “Not only the events themselves, but the betrayal that has come with them.”
North Shore Judge Steven Hanke issued an emergency ruling on July 24 that temporarily removed Campbell’s control of operations at Superior Shores. The order, among other things, appoints a temporary manager to be in charge of operations at Superior Shores because the “property and its rents and profits are in danger of loss and material impairment.” Hanke upheld the ruling during a July 31 hearing that lasted more than three hours. Hanke also gave attorneys involved with the case on both sides until August 7 to file briefs in the case.
What’s known with certainty is that Joe Re, who previously owned Superior Shores with his business partner Dale Jensen, agreed to sell Superior Shores to Campbell on a contract for deed four years ago. The COVID pandemic changed the hospitality industry about three months later, with Campell and Re agreeing, at least over emails presented to the court this week, to alter the terms of the deal.
During Wednesday’s hearing, Re’s attorney, Mark Thieroff, said Campbell has not honored the terms of the contract for deed. Thieroff said insurance policies at the resort were canceled for nonpayment, real estate taxes went unpaid, and Campbell repeatedly failed to produce required financial reports.
As a result, Hanke agreed to place Superior Shores under the management of Kinseth Hospitality Companies, Inc., which is based in Coralville, Iowa. During the July 31 hearing, the company’s executive vice president, Bruce Kinseth, said some of his staff arrived at Superior Shores on July 26 following Hanke’s ex parte order and the appointment of the entity as the “receiver,” or temporary managers, of the resort. Upon initial review of the situation, Kinseth described Superior Shores as a “financial disaster.”
According to the order signed last week by Hanke, under Campbell’s ownership at Superior Shores “association dues have not been timely paid, real estate taxes are delinquent, and payments to various local vendors have not been made,” among numerous other allegations. Kinseth, who appeared via Zoom during Wednesday’s hearing (as did all the participants), said his team were unable to find any financial statements for the past two years. They also discovered a “tremendous amount” of bills due, Kinseth said, adding that some people Campbell and the resort owe money to have come to the property “demanding payment.”
One of the key issues that surfaced in the initial emergency order from Hanke signed July 24 and continually addressed during the July 31 hearing were lump sum, or “balloon payments,” due from Campbell to sellers Re and Jensen. According to the July 24 order s i g n e d by Hank e , C a m p b e l l failed to make the n e a r l y $13 million in balloon p a y ments to the sellers as required by June 1 of this year.
Campbell and his att o r n e y, S c o t t Wi t t y , provided ema i l s to the court Wednesday that they say show Re agreed to extend the deadline of the balloon payments until June 2025. While speaking under oath during this week’s hearing, Re said the agreement was never officially completed. Witty questioned Re at length on this specific topic during the hearing, pointing out that the seller agreed to and implemented every other term in the unsigned agreement, including lowering interest rates during the early days of the COVID pandemic.
Witty claims that the terms of the contract for the deed were altered regarding Campbell’s ownership of Superior Shores during “COVID-19 stay-at-home orders.” As a result, the balloon payments that total approximately $13 million were not due until June 2025. Ultimately, it could be up to Hanke to determine if the emails constitute a legally binding agreement or not.
For his part, Campbell says “so much” of what he heard during the July 31 regarding his financial woes and alleged mismanagement of Superior Shores “was recycled and not the truth.” Campbell and Witty say the Superior Shores property is fully insured, and that any taxes owed against the property were on schedule to be paid. Witty and Campbell did not specifically address claims about money owed to contractors, vendors, and others that Thieroff noted and are listed in court records.
In fact, Campbell suggested during the court proceedings and to this reporter that Superior Shores is in better financial shape and physical condition than it was when he bought it.
“It’s certainly my opinion that the actions of the seller and lender are simply taking advantage of a property that was worth $14.5 million when we took over and the most recent valuation put the property at just under $30 million,” Campbell said in an emailed statement. “This is because of our hard work and impressive unit sales.”
Campbell said during Wednesday’s hearing that he sold units at the resort totaling $4 million during the first half of the year. In addition, there are several more units with pending sales, likely generating several more million dollars. Campbell noted that unit sales hadn’t been occurring at the resort on this scale since 2008.
“Our financial ability was about to be better than it’s ever been,” Campbell said Wednesday.
Witty described Re’s request to have a temporary management company come on board and strip Campbell of his rights to run the resort as “a ploy to get the property back by the seller, who now realizes that the buyer has put a ton of money into improving the property.”
Campbell said the plaintiffs “tried to discredit our concerns that a receiver is detrimental to the business” during the hearing Wednesday. In another email sent to this reporter Aug. 1, Campbell said tangible results are already coming in that support his concerns.
“While I’m sure Kinseth Hospitality is successful, a property in receivership rarely is. I’ve seen hundreds of properties throughout the years in various deal flow networks, and every time one is in receivership, the numbers are always abysmal,” Campbell said. The reality is simple: a receiver cannot perform the same success as an owner-operator who’s onsite putting in their own blood, sweat, and tears.”
Campbell said it did not take long for his concerns to be validated. For example, the week prior to the court order, Campbell explained, Superior Shores brought in $160,000 in reservations. In the week immediately following the appointment of Kinseth Management at Superior Shores, the resort only generated $105,000 in reservations, according to Campbell.
Despite recent warnings from the city of Two Harbors that utilities would be shut off at Superior Shores, alleged vendor debts, and lawsuits and other claims alleging financial mismanagement for lack of payment that now stretch across two counties, Campbell said he hopes “everyone sees the truth” that his company was “current on our monthly payments, that our debt isn’t due until next year, that the property was in fact insured.” Campbell said he hopes “most of all” that people understand that the resort recently was “doing well financially” and “enjoying great success” of recent unit sales.
“I’m so very proud of the work we did at the property,” Campbell said in his statement sent to the Shore Thing. “The testimony I heard (July 31) regarding the property condition was insulting, especially compared to what it was four years ago. There certainly is still work to be done at the place, it’s dated, but we have so many plans to continue to improve this diamond in the rough.”
