As the August Wilson Center for African American Culture struggles to avoid foreclosure, another prominent Downtown building that has faced a similar fate could be on the road to recovery.
The owner of the Union Trust Building, an architectural gem built by industrialist Henry Clay Frick, is proposing to turn over the property to an investment group as part of a Chapter 11 plan of reorganization filed in U.S. Bankruptcy Court in Los Angeles.
Under the proposal, the new owner -- a group led by Barry Porter, co-founder and managing general partner of Beverly Hills-based Clarity Partners LP -- is pledging to invest $18.2 million to pay creditors and to make improvements to the building, which has fallen into disrepair because of the turmoil surrounding the property.
The share devoted to building and tenant improvements would amount to nearly $8.2 million, including $2.2 million for the installation of a chilled water plant, $2 million for elevator modernization and $750,000 for new hot water boilers.
There also would be work done involving paint, plaster and sidewalk repairs; mansard drain cleaning and patching; the building automation system; and a host of smaller improvements.
The group led by Mr. Porter would not be purchasing the 11-story Flemish Gothic landmark itself, opened in 1917, but acquiring the equity in the current ownership, 501 Grant Street Partners.
"The asset is not being sold. The membership interest in the entity is being transferred," said David B. Golubchik, attorney for 501 Grant Street Partners. "This is a pretty well-known piece of property, and [Mr. Porter is] a real estate guy."
It appears that Mr. Porter will have his work cut out for him.
The disclosure statement filed as part of the proposed reorganization by 501 Grant Street Partners stated that the Union Trust Building, built as a shopping arcade, is "in a state of disrepair" with "significantly below market leasing rates resulting in a lack of rental revenue." The present occupancy rate, it said, is about 39 percent, well below the market average of 92 percent.
An appraiser hired by SA Challenger, the lender that still wants to foreclose on the property, estimated the building's value at $22.6 million, well below the $41.4 million SA Challenger was seeking in the foreclosure. Michael Kamen and Gerson Fox, the two top principals in 501 Grant Street Partners, paid $24.1 million for the building in 2008, but the two close friends later had a falling out because of the financial turmoil surrounding a number of properties they jointly owned.
Based on the disclosure statement, the new owner is counting on capital and tenant improvements as well as broker commissions to raise occupancy rates and rental revenues to market levels.
"It really is to bring [the building] back to its original glory, improve the tenancy, make it a nice place once again," Mr. Golubchik said.
Mr. Porter could not be reached for comment Monday.
A hearing is scheduled Dec. 19 in Los Angeles before U.S. Bankruptcy Judge Sheri Bluebond on the confirmation of the 501 Grant Street Partners plan of reorganization.
Mr. Golubchik said SA Challenger has been opposed to the effort to "keep the building alive" and is still seeking to foreclose. Joshua D. Wayser, attorney for the lender, declined comment. Under the proposed reorganization, the amount owed to SA Challenger, currently estimated at $45.8 million, would be repaid over time.
The lender was poised to sell the building, designed by Frederick J. Osterling, at sheriff sale last January before several creditors of 501 Grant Street Partners forced it into bankruptcy to prevent that from happening.
It has remained there since then, but Mr. Golubchik sees better days ahead. "It's fair to say that by the end of this year it should all be resolved," he said.neigh_city - businessnews
Mark Belko: firstname.lastname@example.org or 412-263-1262. First Published October 7, 2013 8:00 PM