One of Downtown's architectural jewels, the Union Trust Building on Grant Street, could be headed for a sheriff sale now that its owner has withdrawn a plan to reorganize in U.S. Bankruptcy Court in Los Angeles.
At a hearing scheduled for Thursday, lender SA Challenger wants U.S. Bankruptcy Judge Sheri Bluebond to lift the stay that has prevented it from foreclosing on the Pittsburgh property.
In a court filing Monday, SA Challenger said that, without a plan to reorganize, opposition to the relief from the stay by owner 501 Grant Street Partners is "non-existent."
"In sum, this is a single-asset real estate case with no plan, no debt service and no revenue, which is administratively insolvent with no hope of reorganizing," SA Challenger attorney Joshua Wayser wrote in his arguments.
Owner 501 Grant Street Partners withdrew a Chapter 11 plan of reorganization in a one-paragraph filing made last week, marking the latest twist in a case that has stretched on more than a year, leaving the once-proud property built by industrialist Henry Clay Frick nearly two thirds vacant and in a state of disrepair.
The building was scheduled for a sheriff's sale last January before several creditors forced 501 Grant Street Partners into bankruptcy, stopping the foreclosure. That occurred after former U.S. Bankruptcy Judge Judith K. Fitzgerald in Pittsburgh had dismissed a separate petition filed by 501 Grant Street Partners for Chapter 11 bankruptcy protection to avoid a sheriff sale scheduled in August 2012.
It's unclear why the building's owner decided to withdraw the plan of reorganization last week. The filing does not give a reason and 501 Grant Street Partners attorney David B. Golubchik did not respond to phone calls or emails seeking comment.
In the plan of reorganization filed earlier with the court, a group led by Barry Porter, co-founder and managing general partner of Beverly Hills-based private equity Clarity Partners LP, was proposing to acquire the equity in 501 Grant Street Partners. Mr. Porter also pledged to invest $18.2 million to pay creditors and make building improvements.
Mr. Porter could not be reached for comment on Tuesday. Under that proposed plan, the amount owed to SA Challenger, currently estimated at $45.8 million, would have been repaid over time.
David Rudov, a local bankruptcy attorney who is not involved in the case, said the decision to withdraw the plan does not bode well for 501 Grant Street Partners. "Superficially, it looks like the debtor has thrown in the towel," he said.
In its filing, SA Challenger, which was assigned the building's mortgage by U.S. Bank, argued that 501 Grant Street Partners' move has conceded what the lender "has asserted all along: The plan cannot be confirmed." It also claimed the owner did not have the money to pay more than $3 million in administrative expenses it is owed.
A disclosure statement filed previously by 501 Grant Street Partners stated that the 11-story building, designed by renowned architect Frederick J. Osterling, was "in a state of disrepair" with "significantly below market leasing rates resulting in a lack of rental revenue."
SA Challenger has said in court filings that the structure is beset by maintenance problems, from sidewalk damage that seems to be allowing water to seep into the basement to issues with some of the elevators.
An appraiser has valued the building at $22.6 million. Michael Kamen and Gerson Fox, the top principals in 501 Grant Street Partners, paid $24.1 million in 2008 but the two close friends later had a falling out because of the financial turmoil surrounding properties they jointly owned.
Opened in 1917, the Flemish Gothic building originally was home to a four-story shopping arcade with 240 shops on the lower levels and 700 offices above. The architectural style dated to 1500. The structure was patterned after the 57-story Woolworth Building in New York City.
Mark Belko: firstname.lastname@example.org or 412-263-1262.