Mueller Plans To Pay Debts, Do More Building

FEDERAL WAY

Just three years ago, Henry Mueller was one of the nation's largest apartment complex developers.

Then on Jan. 30, Mueller filed for Chapter 11 bankruptcy, unable to make payments on construction loans because he could not sell several new apartment buildings in Washington, Oregon and Nevada.

Now, Mueller is confident his Mueller Development Co. will successfully reorganize and eventually get back to the building business. A hearing is scheduled for Jan. 15 at U.S. Bankruptcy Court in Seattle to consider approval of Mueller's reorganization plan.

"I know we're going to work things out," says Mueller, 52. "Then I can go on with my life."

"I'm a builder," he continues. "And I eventually want to get back in the building business."

But even if the plan is approved by a judge next month, Mueller must satisfy his creditors before he can get back to building. His company, based here, owes dozens of creditors more than $128 million.

Mueller's unpaid bills include construction loans made by Pacific First Bank, Seattle First National Bank, U.S. Bancorp Mortgage Co. and The Bank of California. Those banks made secured loans of between $26 million and $34 million on 12 apartment complexes Mueller was unable to sell in the three states.

Six of the complexes are in King, Pierce and Snohomish Counties. Bank of Tokyo, Sakura Bank and Bank of Hawaii also have loans on the apartments.

Mueller's written plan calls for the apartments to be sold over several years and for the bank loans to be paid in full. Mueller says he hopes to get the apartments sold next year.

The relationships between the banks and Mueller have apparently been amicable during the bankruptcy. The banks lent Mueller cash using the apartments as collateral during the last few months.

"We have consensual agreements with all the banks," says Mueller. "They'll get their money."

One of the dozen apartment complexes was sold recently for $11.4 million, says Mueller. According to Mueller's filing, his company's assets are worth a total of nearly $137 million. The apartments are fully-constructed and have 90 percent occupancy rates, the court papers say.

After paying off the bank loans and other expenses, the filing projects nearly $389,000 will be left over to pay unsecured creditors.

Mueller says the unsecured creditors will get 60 cents on the dollar, but his own filing says he owes those creditors more than $5 million.

Mueller is contesting at least two claims, one made by a real estate company and another by a former employee.

Elizabeth Ann Droll claims Mueller owes her $500,000. In court papers filed by her lawyer, Droll accuses Mueller of "sexual harassment, mental cruelty and misconduct of employer to employee," during her employment as a secretary at Mueller Development in 1990.

Droll, whose address is listed as Federal Way in court papers, could not be reached for comment. Her lawyer did not return phone calls.

Mueller's objection, filed in court, says Droll's claims are "inflated" and "highly disputed."

Mueller also discounts claims that he owes Aspen Realty and Security Realty $553,800 in commission payments. The Las Vegas brokers arranged the sale of a Mueller apartment complex in Las Vegas to a Japanese company for $18.5 million, says Arthur Espinosa, owner of Security Realty.

After the company put down earnest money on the apartments, Mueller backed out of the deal because he had a better offer from another buyer, says Espinosa.