PMC Property Group secures Downtown Pittsburgh's James Reed Building
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One distressed building Downtown was sold in bankruptcy court Tuesday, while another controlled by the same owners could be headed for a similar fate in the weeks ahead.
PMC Property Group became the owner of the James Reed Building at 435 Sixth Ave. when nobody else stepped forward during a hearing in U.S. Bankruptcy Court in Los Angeles to bid more than the $5.5 million PMC offered for the property.
The nine-story Beaux Arts-style building, which has been vacant for three years, ended up in a Chapter 11 bankruptcy to avoid a sheriff sale after its California owners, Michael Kamen and Gerson Fox, couldn't make a balloon payment on a PNC Bank mortgage.
They purchased the property for $6.5 million in October 2008.
PMC emerged as the frontrunner to secure the building in the bankruptcy sale after it was selected by Chapter 11 trustee Howard Ehrenberg to be the "stalking horse," or opening bidder for the structure. The $5.5 million offer was the highest of five bids solicited in advance of the hearing.
Mr. Ehrenberg hopes to close on the transaction by Oct. 15. He intends to use the proceeds to pay off creditors, including a negotiated $2.2 million payment plus interest calculated from July 1 to PNC and more than $500,000 in claims by Allegheny County, the city and the city school district for delinquent property taxes.
PMC plans to convert the James Reed Building into residential space. With the latest acquisition, the Philadelphia developer now owns or is in the process of acquiring seven properties Downtown totaling 1.2 million square feet. One of the properties it owns is the Regional Enterprise Tower across the street from the James Reed Building. It intends to convert the upper half of that building into apartments.
The James Reed Building isn't the only property owned by Mr. Kamen and Mr. Fox facing a potential court-supervised sale.
Last week, lender SA Challenger asked a U.S. Bankruptcy Court judge in Pittsburgh for permission to move ahead with a sheriff sale for the venerable Union Trust Building on Grant Street.
The owners, operating under the name 501 Grant Street Partners, sought bankruptcy protection for the building to prevent the real estate from being sold at a sheriff sale in August after they defaulted on a $41.4 million mortgage.
With the bankruptcy filing, the sale was automatically halted. But SA Challenger filed a motion Friday asking for the stay to be lifted so that it can proceed with a foreclosure.
"It is clear that the debtor has utilized the bankruptcy process merely to stall the inevitable sale of the property," the motion states.
SA Challenger, which was assigned the mortgage by U.S. Bank, claimed in the motion that the owners have no current income to fund operating expenses or to maintain the property and no way to pay for the administrative expenses associated with the bankruptcy case. They also have no equity in the property, it said.
"Unless relief is immediately granted to SA Challenger, the property will quickly deteriorate, suppliers and employees will refuse to support the property, necessary maintenance and improvements will be ignored, utilities and other necessary services may be terminated, and the property could become a hazard or be irreparably harmed, especially as winter is rapidly approaching," the motion stated.
Mr. Kamen and Mr. Fox paid $24.1 million for the 11-story Union Trust Building, built by industrialist Henry Clay Frick, in February 2008 with the intent of restoring its grandeur.
But in its motion, SA Challenger said the building is now only 30 to 40 percent occupied. While the owners estimate the value of real estate at $27 million to $59 million, the lender claims it isn't even worth $27 million at this point. The lender also cited a recent lawsuit filed by Mr. Kamen in which he estimated the value at $20 million to $23 million.
The owners also have been involved in litigation with Siemens Corp., the major tenant in the Union Trust Building, and have been feuding among themselves over the defaults and bankruptcies that have plagued many of their property holdings here and elsewhere.
Such disputes create additional obstacles for the debtor, the motion stated.
"After going through two foreclosure actions and a potential receivership, the insurmountable problems facing the debtor show that the debtor simply [cannot] do what it needs to do to service the debt," it said.
Roger Bould, an attorney for the owners, could not be reached for comment.
First Published September 12, 2012 12:00 am