By JAMES FINK
Business First

With a court-appointed receiver and special counsel officially signed on, the fate of the financially troubled Statler Towers building in downtown Buffalo now hinges on two fronts.

One is the tandem of Buffalo businessman Stephen Leous, the court-appointed receiver for the landmark Delaware Avenue building, and Buffalo attorney Bruce Zeftel, who was named special counsel to Leous. Both were appointed by state Supreme Court Judge Hon. John Curran March 3 and approved March 11 following a two-hour closed-door meeting between Curran and lawyers representing BSC Development Group, the Statler's owner, and Park Lane Catering, one of the building's anchor tenants, who brought the legal action to court.

Putting the building into receivership is one of the first steps toward possible removal of BSC Development as its owner.

Negotiations between Park Lane Catering and BSC Development over a possible sale remain tenuous.

Park Lane Catering owner William Koessler, through his attorney, David Pfalzgraf Jr., is seeking to buy the Statler from BSC Development and its principal owner, British investor Bashar Issa.

Koessler's first offer has been rejected by Issa, confirmed the developer's two local attorneys, Harris Beach partners Richard Sullivan and Andrew Miller.

"We didn't consider it legitimate," Miller said. "It was based on too many contingencies and cost reductions."

Pfalzgraf agrees that while talks continue, the outlook for now appears bleak. In a hearing last week, he expressed hopes by Park Lane Catering that a purchase agreement could be reached soon.

Miller stressed that any sale would have to approved by Issa and the receiver.

In a related matter, Issa's father, Mohmoud al Issa, who holds a $4.5 million mortgage on the Statler, has retained local attorney Blaine Schwartz to oversee his interest. The elder Issa filed the mortgage last May.

"There are separate interests between the father and the son," Schwartz said. "For now, we are just monitoring all the actions."

The Statler, a downtown landmark that was acquired by Issa three years ago, has been losing tenants and cash flow in recent years. Ambitious development plans by Issa remain in limbo, with only limited repairs of the $100 million renovation project pledged by Issa completed.

The 18-story, 550,000-square-foot building has a monthly rental roll of $100,000 and is losing $70,000 monthly. The building needs at least $4 million in repair work. It has not had a new tenant sign a lease in more than 18 months and is down to just 25 tenants.

BSC Development owes various utilities more than $350,00 in past-due payments. Issa also faces deep financial problems with several of his developments in Manchester, England.

The unsettled and uncertain fate of the Statler is impacting Park Lane Catering, which is losing bookings despite running a full operation in the building.

Pfalzgraf said his client wants to continue to push for a sale of the Statler, but if all efforts fail, then they will push to put the building into an involuntary Chapter 11 proceeding under the U.S. Bankruptcy Code.

"I don't want to do it, but we may not see any other options," Pfalzgraf said.