Dollar Bank says the city's opposition to the sale of the August Wilson Center for African American Culture to a New York City developer could trigger a foreclosure.
In motion filed Thursday, the bank is pushing to foreclose on the debt-plagued Downtown property if court-appointed conservator Judith Fitzgerald can't finalize a deal with 980 Liberty Partners by June 30.
It urged Judge Lawrence O'Toole of Allegheny County Common Pleas Orphans' Court to schedule a hearing July 1 to allow the foreclosure to advance if the sale hasn't been completed.
The bank stated it was left no choice because of claims by the city's Urban Redevelopment Authority that deed covenants restrict the use of the property. Such arguments, the bank maintained, are "calculated to force a foreclosure sale of the center's assets."
"If the URA's position with regard to use restrictions is correct, [Ms. Fitzgerald] cannot sell the property free and clear of use restrictions without the URA's consent. In that instance, the URA's refusal to give such consent eliminates any alternatives to and thereby foreordains foreclosure," the bank stated in its motion.
"If the URA's position with regard to the use restrictions is incorrect, its refusal to consent nonetheless chills (or, indeed, destroys) the willingness or practical ability of any buyer to proceed to a prompt closing and the result is the same."
The bank's motion came two days after Judge O'Toole authorized the sale of the $40 million property to 980 Liberty Partners, which has plans to build a 200-room luxury hotel on top of the structure.
His approval allowed the developer, which submitted the high bid of $9.5 million for the building, to begin studies to determine if the hotel is feasible. If it is not, 980 Liberty Partners will walk away from the deal.
The URA, with the backing of Mayor Bill Peduto, state Attorney General Kathleen Kane and county Executive Rich Fitzgerald, are opposed to the sale. They prefer a $5 million bid submitted by the Pittsburgh Foundation, the Heinz Endowments and the Richard King Mellon Foundation to buy the real estate with the goal of preserving its mission as a center for African American arts and culture.
In court papers, the URA has argued that the sale to 980 Liberty Partners would violate deed covenants that require the building to be used for African-American arts and culture. It also has maintained that the building, opened in 2009 and named after the Pulitzer Prize-winning playwright who grew up in the Hill District, cannot be modified without URA consent.
But Dollar Bank claimed in its motion that the URA's opposition based on the deed restrictions leaves "no doubt as to its intention to impede any sale except on the URA's terms."
It stated that the URA agreed two years ago to make the use restrictions and the $574,200 it was owed by the center secondary to the Dollar Bank mortgage.
The URA had no comment Thursday.
Ms. Fitzgerald, a former U.S. bankruptcy judge, said she saw the bank's motion as a way of asserting its rights. "They want to make clear that they have a right to foreclose if it comes to that," she said.
She said she doesn't feel any added pressure because of the bank's motion to complete the sale with 980 Liberty Partners or to cobble together a consensus deal that would involve the developer and the foundations and satisfy the objections of the URA and the others.
"From my point of view [the Dollar Bank motion] is not going to change anything. We're still going to try to come to a global resolution and we'll see what happens," she said.
In its motion, Dollar Bank said it remains supportive of Ms. Fitzgerald's efforts to sell the building.
"Alone among parties to this action, Dollar Bank has provided financing necessary to cover certain costs of the receivership proceeding. By contrast, sixteen months after the center's default, six months after appointment of a receiver, and three months after the court directed liquidation, the URA is opposing a sale that would pay Dollar Bank (and the URA) in full," it stated.
The bank estimates that it has spent more than $200,000 paying insurance, utility, security and other costs at the building since it moved to foreclose last September after the center defaulted on the $7 million mortgage.
But its patience is wearing thin. It stated it intends to stop doing that once the stay on the foreclosure is scheduled to end June 30.
"In circumstances where the URA rejects any feasible alternative to foreclosure, Dollar Bank cannot continue to fund costs associated with the receivership. Indeed, any incremental expenses might be uncollectable from the center," it wrote.
Dollar also estimated that with interest, fees and expenses, it is now owed more than $7,675,000 on the mortgage. The $9.5 million Liberty Partners bid would be enough to pay that off along with other debts, including the $574,200 owed to the URA. Under the law, Ms. Fitzgerald must get enough in a sale to satisfy the mortgage, the bank stated.
Mark Belko: firstname.lastname@example.org or 412-263-1262. First Published May 29, 2014 2:03 PM