By JAMES FINK
Business First

Buffalo bankruptcy attorney Morris Horwitz was named trustee for the financially ailing Statler Towers in the latest legal move concerning the downtown Buffalo landmark.

Horwitz's appointment Thursday, which had been anticipated, came despite a last-ditch effort by the Statler's owner, BSC Development Buffalo LLC, and its managing member, British investor Bashar Issa, to delay proceedings in U.S. Bankruptcy Court. The relatively rare involuntary Chapter 11 proceedings were brought against BSC Development Buffalo LLC by four Statler tenants, including Park Lane Catering.

The legal action is being sought to remove Issa and BSC Development as the Statler's owner and to find a new owner for the 18-story, 80-year-old building, which overlooks Niagara Square.

"Our intention is to keep the building open and to continue to provide services for tenants," Horwitz said.

Horwitz said he will review all options concerning the Statler's future, including finding a new buyer, either through negotiations or a court-sanctioned auction.

"We must find the most appropriate way to restructure," he said. "Part of that is to find a willing and able buyer."

Hon. Carl Bucki, chief bankruptcy judge for the Western District of New York, appointed Horwitz as trustee.

"There is a need for prompt action," Bucki said. "A trustee is the best opportunity for prompt action. There is a risk of harm to innocent tenants. There is a risk of harm to innocent sub-tenants. The merits of the issue need prompt consideration."

The Statler, which has seen its tenant roll drop in recent years, is losing $80,000 a month while earning, at most, $100,000 in monthly revenues. Many of the tenants were withholding rent payments over frustration with the fact that little progress has been made in terms of renovating the building or keeping basic services in operation.

Issa, who bought the Statler in 2006, had promised a $100 million top-to-bottom makeover of the building, including plans to bring a 150-room hotel to the complex, renovate office space and convert the upper floors into upscale condominiums. Only a small scale of the renovations were completed and virtually no work has been done in the Statler, in terms of repairs, for more than one year.

Issa is also facing legal and financial issues in Manchester, England.

In two motions filed with Bucki just a few minutes before Thursday morning's proceedings were to begin, Issa asked that the involuntary bankruptcy action be set aside. Issa disputed several claims from earlier court sessions, alleging that Park Lane Catering was acting in bad faith.

Bucki dismissed Issa's claims.

"The legitimacy of the papers is open to question," Bucki said. "The papers that were submitted (by Issa) do not comply with the rules of the court."

Bucki heard testimony that the four tenants who brought the involuntary bankruptcy action to court are owed approximately $33,000. Park Lane Catering earlier this month filed a mechanic's lien against BSC Development claiming it is owed $16,700 for emergency repairs it had to make near the Statler's Franklin and Genesee streets entrance.

Park Lane Catering last fall began a lawsuit in state Supreme Court against BSC Development, claiming that it has lost more than $1 million in bookings due to the raw state of the building and portions of its lobby. Park Lane Catering runs special events, ranging from weddings to corporate functions, in several areas of the Statler. Park Lane Catering has more than 200 future events booked at the Statler.

All of the events will go on as scheduled.

William Koessler, Park Lane Catering owner, is working with Chicago-based interests who want to buy the Statler and have pledged to make at least $70 million in renovations to the building. Issa has rebuffed Koessler's offers.

The involuntary bankruptcy proceedings began earlier this month as the Statler was faced with the prospect of National Fuel Gas Corp. shutting off service to the building. National Fuel is owed more than $210,000 in unpaid bills from BSC Development Buffalo. The bills pre-date the bankruptcy filing.

Other utilities are also owed monies well into the six-figure range, including National Grid and the City of Buffalo's Water Department.

In an April 16 ruling, Bucki ordered National Fuel to conduct an April 24 meter reading and submit a bill to the trustee by April 27. The bill must be paid by May 4 or National Fuel may exercise its right to shut off service to the Statler.

Bucki said he is concerned about what the long-term impact may be not only to the Statler, but its tenants.

During the April 16 hearing, Bucki heard from several tenants who expressed various levels of concern about the building's future and what would happen if they were forced to leave the Statler with little notice.

Horwitz said he will be meeting with the tenants and other interested parties in the coming days. From those meetings, he will determine the appropriate course of action.

"I need to determine what's best for the tenants and the property," Horwitz said.

Horwitz said he will collect all the rent that's due to help pay for the utilities, Statler's handful of employees and insurance costs.

"That's the key to keeping the building open and functioning," he said.