Dollar Bank faults URA for blocking sale of August Wilson Center

The gloves have come off in the battle over the August Wilson Center for African American Culture.

In a blistering counterclaim filed Tuesday, Dollar Bank charged that the bid by the city’s Urban Redevelopment Authority to block the sale of the Downtown building to New York City developer 980 Liberty Partners was “inconsistent with good public stewardship” and a breach of its mission and purpose.

Not to be outdone, court-appointed conservator Judith Fitzgerald maintained in her own counterclaim that the URA’s actions are “arbitrary and capricious and an abuse of the discretion” it has been granted.

In the filings, the bank and Ms. Fitzgerald argued that there is nothing in the center’s deed or in city-approved redevelopment plans for the property that restricts the use of the $40 million building to an African-American culture center.

To the contrary, the redevelopment plan, the bank stated in its filing in Allegheny County Common Pleas Orphans’ Court, allows for mixed uses such as a hotel. That’s the very type of development being proposed by 980 Liberty, which is seeking to build a 200-room luxury hotel on top of the center as part of its $9.5 million purchase.

Ms. Fitzgerald is proposing to sell the building to pay off Dollar Bank, which holds the $7.9 million mortgage that the center defaulted on last year, and other debts. She was appointed after the bank filed to foreclose on the property last year.

The URA has fought tooth and nail to block the proposed sale to 980 Liberty, claiming that deed covenants prevent the building from being used for anything but an African-American cultural center and prohibit changes to the exterior without its consent.

But the bank and Ms. Fitzgerald claim that simply is not true. They stated there is nothing in the center’s deed, nor in the redevelopment plan, that requires that.

“The URA’s failure to consent to the proposed sale, and its insistence on attempting to enforce alleged restrictive covenants [such restrictions and covenants being hereby expressly denied] lacks any rational basis in law or equity, is arbitrary and capricious, and is an unreasonable restriction on the alienation of the property,” Ms. Fitzgerald wrote.

Dollar stated that a 2006 business plan prepared by the center called for additional build-out of the property’s unused development rights, including the construction of a 10-story tower that could accommodate hotel, office or residential uses. It charged that the URA knew at the time that the center would need additional revenue streams beyond its own operation to remain financially viable.

The proposed sale to 980 Liberty and the construction of the 200-room hotel not only would enable the center to continue operating in the building, but would service a need identified in the redevelopment plan for the convention center area, create jobs and return the property, now tax exempt, to the tax rolls, the bank argued. The developer is proposing to provide the August Wilson Center limited free space and use of the theater for at least 180 days of the year at a nominal charge as part of its purchase.

Given that, the URA’s actions in trying to block the sale “are inconsistent with the 2003 [redevelopment] plan and the redevelopment law and inconsistent with good public stewardship,” the bank claimed, adding the city agency had “no legitimate basis” to oppose the sale.

Dollar also has argued that the URA subordinated its rights to the bank in 2012 negotiations to convert a $11.5 million bridge loan into a $7 million term loan. At no time during those talks did the URA notify the bank that the property must be used only as an African-American culture center or that it had final say over any improvements to the building, Dollar stated. The URA approved its own $574,200 loan to the center at the time. Its board voted earlier this month to forgive that loan.

In its filing, the bank wants Judge Lawrence O’Toole to declare that the redevelopment plan, deed and other documents do not limit the use of the property to an African-American cultural center and that even if there are restrictions, it would not impact the bank’s ability to foreclose on and resell the property.

Dollar has scheduled an Oct. 6 sheriff sale for the building if Ms. Fitzgerald is unable to complete the deal with 980 Liberty by then.

URA officials declined comment.

The agency has favored a $7.2 million “back-up” bid advanced by the Pittsburgh Foundation, the Heinz Endowments and the Richard King Mellon Foundation. The bid includes $1.2 million in URA money and $1 million from a county-related entity. The foundations have said their interest is in preserving the center’s mission as a hub for African-American arts and culture.

The deed covenants have long been an “open wound,” as Judge O’Toole called them, in the battle over the center. The judge has scheduled a trial Sept. 29 to deal with the issue, one that may decide the fate of the center itself as well. The developer has said it would not buy the building if the covenants are upheld because they would prevent the construction of the hotel.

Mark Belko: or 412-263-1262. First Published July 29, 2014 12:00 AM

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