Troubled Zephyr Theatre in Stillwater to get new building owner

The Manitou Fund, one of the state's largest private foundations, has signed a purchase agreement to buy the beleaguered Zephyr Theatre property in downtown Stillwater, a surprise move that could rescue the shuttered theater after its founding director resigned amid spiraling debts and allegations of financial wrongdoing.

The April 12 sale announcement was followed a day later by a second press release stating the theater would serve as interim home to the St. Croix Valley-based River Grove elementary school.

The twin announcements come at a vulnerable time for the Zephyr: It owed at least $272,000 in back taxes, employee pay and credit card debt when it closed last fall, according to its board chair. The organization said at the time that it would update that number after a full financial assessment but has yet to disclose the results.

The theater also owes at least tens of thousands of dollars to multiple creditors, according to former employees and the theater's own financial documents. It also faced steep monthly payments on its mortgage from the purchase of its present home at 601 N. Main St., the former Minnesota Zephyr train depot. Since closing last year and with no events on its schedule, it's not clear how the theater has been meeting its financial obligations.

The theater is also entangled in a federal lawsuit brought by former employee Bil MacLeslie, who alleges racketeering and fraud by board members and former director Calyssa Hall. The suit says Hall created the nonprofit theater to enrich herself and her family and used a compliant board to break laws governing how such an organization should be run. A pretrial hearing is scheduled for May. MacLeslie's attorney, Devon C. Holstad of Winthrop and Weinstine, said Monday that former employees are still owed back pay.

Terms of the sale to the Manitou Fund were not provided, and it's not clear if the nonprofit plans to assist the Zephyr organization beyond the purchase agreement to buy their building. On Monday, Zephyr Board Chair Nicole Bartelt said in an email that the organization was working on a plan to clear its debts to the government, bank, vendors and employees. She didn't provide numbers or any specific financial information about the organization's health.

"It will take the collaboration and cooperation of everyone to achieve this goal," she wrote.

A press release issued by the theater said, "Manitou Fund will give The Zephyr time to reorganize its educational and performance programming, plan for the future, enter into a lease opportunity and exercise an option to repurchase at a future date."

The president and chief executive of the Manitou Fund, Oliver Din, said in a statement that "Manitou Fund is pleased to offer support to an essential and impactful community-driven arts collaborative. This support effort enables the arts organization to envision and engineer a future for community-based arts education and programs."

For now, it appears the theater will become a school this fall. River Grove said its relocation to the Zephyr Theatre building for the 2023-24 school year would provide a home while it works on long-term plans for "a forest-based campus."

"We're extremely excited about this opportunity and incredibly thankful to Manitou Fund for providing us a unique space in such an amazing location," the school's executive director, Drew Goodson, said in a statement. The Manitou Fund is planning a renovation of the theater this summer before the school moves in, he said.

The Manitou Fund was created in the 1960s by Minnesota businessman Donald McNeely, who made a fortune in his family's storage business. He was a co-founder of Control Data Corp. and a onetime owner of the Minnesota Vikings. He helped bring the Washington (D.C.) Senators baseball team to Minnesota, which became the Twins. He died in 2009, and his storage company, Space Center Inc., was sold in 2019 to Blackstone Inc. for $1.24 billion.

Most of the sale proceeds were funneled into the Manitou Foundation, which McNeely and his wife, Marjorie, named for the land on White Bear Lake where they made their home. The sale of Space Center also meant that several company employees who were serving on the Manitou Fund board were let go, leaving the foundation in the control of three of McNeely's children with family friend Din serving as president. In order to maintain its nonprofit status, the billion-dollar nonprofit must give away 5% of its assets each year, or about $50 million.

The fund's most recently available Form 990 tax return shows money flowing to a wide range of environmental, arts, education and other organizations across the country. The foundation also paid $100,000 to the Marine Area Community School in 2021, according to tax returns.