|By Matt Glynn, The Buffalo News,
N.Y.McClatchy-Tribune Regional News
April 24, 2009 - The company that operates the Statler Towers was forced into involuntary Chapter 11 bankruptcy on Thursday, a blow to developer Bashar Issa's efforts to maintain control the downtown landmark, and raising creditors' hope of an imminent sale to new ownership.
U. S. Bankruptcy Court Judge Carl L. Bucki issued the order regarding BSC Development of Buffalo LLC at the request of creditors owed money by Issa and his company.
Bucki has named attorney Morris L. Horwitz as the Bankruptcy Court trustee for the property. Horwitz said after the hearing that he plans to meet with Statler tenants early next week "to determine what's best for the tenants and the property."
"The intention is to keep the building open and to continue to provide services to the tenants," he said.
David Pfalzgraf Jr., an attorney for Park Lane Catering, the Statler's major tenant, said the judge's order ensures scheduled events at the property will occur without interruption and enables the tenants to continue their operations.
Additionally, he said, "it sets the stage to finally, finally transition the building from Mr. Issa and BSC to a credible, local third party." That future new ownership, he indicated, could possibly include William Koessler, the owner of Park Lane Catering.
Julia Kreher, an attorney with Hodgson Russ who represented four creditors in their request for the bankruptcy order, said: "I hope it leads to a stability of the Statler Towers and a sale of the building."
Both Pfalzgraf and Kreher said their clients hope such an ownership change will happen quickly, perhaps in the next month or two.
Horwitz said one of his responsibilities as trustee is to "find the most appropriate way to restructure," and a sale is one possibility. But he said after the hearing he was not aware of a prospective buyer for the Statler.
Issa, whose financially troubled company has operated the Statler for three years, made a last-minute bid to delay Thursday's hearing or to block the bankruptcy request altogether.
Neither Issa nor an attorney for the British developer attended the hearing. But he filed objections in documents that arrived via an express delivery service at the court minutes before the scheduled start of the proceeding.
Bucki reviewed the documents during the hearing and noted that court rules required a corporation to have counsel appear in court on its behalf. Even apart from the technical issues, he concluded the creditors had presented a compelling case in favor of forcing BSC into bankruptcy.
Bucki said an involuntary bankruptcy, against the debtor's will, was unusual but not unheard of. "There is a need for urgent action," he said, citing testimony by creditors as well as testimony last week about mounting utility bills that threatened the Statler's viability, should those services be turned off.
Bucki said he felt the best course of action was through the bankruptcy process and "the naming of a qualified trustee."
Horwitz, the trustee, said his top cost concerns are utilities, payments to Statler employees, and insurance. "That's what will keep the building opening and functioning," he said.
Attorneys for Koessler have said they felt the bankruptcy filing was necessary after discussions with Issa and his father, who holds a $4.5 million mortgage on the property, failed to result in a deal that would have led to an ownership transition for the Statler. About 40 tenants operate there.
When Issa took ownership of the Statler in 2006, he ignited hopes of a revival of the faded property. He envisioned an overhaul costing as much as $80 million that would create a mix of hotel, office and residential space. But his far-reaching plan ultimately stalled.
The 86-year-old Statler in its glory days hosted presidents, big-name entertainers and VIPs, and remained a hotel until the 1970s when a local investment group began converting it to an office tower.
The Statler's more recent history has been dominated by rising vacancies and a struggle to find a new direction.
In 1992, it was acquired in a foreclosure sale by the York- Statler Group, led by Gerald Buchheit. He remained the owner until 2006, when Issa bought the Statler for $5 million.
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