By JAMES FINK
Business First

In what may be the first steps toward removing BSC Development Buffalo LLC from its ownership of the historic Statler Towers, Buffalo businessman Stephen Leous has been named a court-appointed receiver and special counsel for the financially troubled downtown landmark.

State Supreme Court Judge Hon. John Curran named Leous, owner of New World Trade, as the court-appointed receiver and Buffalo attorney Bruce Zeftel as a special counsel. The appointment of Leous and Zeftel came as the result of legal action brought against BSC Development by one of the Statler's anchor tenants, Park Lane Catering.

Leous and Zeftel will handle such matters as collecting rent, making payments and marketing the building.

The receivership does not include a 44-foot luxury yacht acquired by BSC Development's owner, Bashar Issa, that remains stored in Western New York.

Park Lane Catering sought the court-appointed receivership after the Statler has fallen into what legal documents described as a "depleted and dilapidated state."

Curran made his appointments following a series of hearings that began late last year and concluded Friday afternoon. The hearings included a rare site visit of the Statler by Curran Friday afternoon.

BSC Development is owned by British investor Issa, who bought the Statler in 2006 and promised to renovate the structure but never delivered on his pledge. Issa's BSC Development Group in Manchester, England, is also facing severe financial difficulties and several of his projects have been placed into receivership.

"Bashar Issa's profile in England doesn't instill confidence," Curran said.

All parties agree that the Leous and Zeftel tandem of overseeing the Statler may be a short-term venture.

David Pfalzgraf Jr., Park Lane Catering's attorney, confirmed that William Koessler, Park Lane Catering's owner, is attempting to put together an investment group to purchase the Statler. The deal - if there is one - will be completed within seven to 10 days.

"The receivership is the first step in an orderly transition to a group led by Mr. Koessler," Pfalzgraf said.

However, if a deal cannot be struck, Pfalzgraf said several of the Statler's creditors may opt to put the 18-story, 550,000-square-foot building into involuntary Chapter 11 proceedings under the U.S. Bankruptcy Code. To begin such a proceeding, only three creditors are needed under federal law.

"We think there are plenty more than three," Pfalzgraf said.

Meanwhile, Andrew Miller, one of BSC Development's attorneys. said his client may consider appealing Curran's decision, but only if a new purchase deal can't be consummated.

"An appeal is certainly an option we'd look at," Miller said. "It is a possibility we'd have to consider."

The fate of the Statler remains cloudy.

The building, despite its historic status and prime downtown location overlooking Niagara Square, is bleeding red ink. The building has less than 25 tenants and a monthly rent roll of approximately $100,000. The building loses at least $70,000 per month, according to testimony given during the hearing. Last year, it finished with a deficit approaching $1.5 million.

Among its creditors is the City of Buffalo, which is owed $54,218 in past due water payments. National Fuel Gas Corp. is owed $157,498 while National Grid says BSC Development is $97,884 behind in payments.

The Statler has just $19,000 in its bank account, while its current debts amount to more than $1 million. The Statler has not signed a new tenant in 18 months and lost six in recent months.

In addition, BSC Development owes property taxes to both the City of Buffalo and Erie County with the county considering a possible in rem action, although both Pfalzgraf and Miller say that is an unlikely scenario.

"We're not concerned about any imminent tax proceedings," Pfalzgraf said.