By JAMES FINK
Business First

A federal bankruptcy judge has set a July auction date for potential bidders for the financially ailing Statler Towers.

Hon. Carl Bucki, chief judge of U.S. Bankruptcy Court for the Western District of New York, set a July 9 deadline for bids on the downtown landmark, with an auction to be held July 14 - but only if two or more bids are submitted. Bucki will consider the bids and auction results during a July 21 hearing.

The move could see BSC Development Buffalo LLC and its principal, English investor Bashar Issa, losing ownership of the Statler.

Bucki said he expects the transaction to be completed by the end of July.

In a last-minute filing late Wednesday morning, attorneys representing Issa's father, Mohmoud Al Issa, who holds a $4.5 million mortgage on the property, challenged the auction. The Jordan businessman was not present for the proceedings.

"We don't disagree that the property needs to be sold, but not done so in such a hurry-up manner," said Mohmoud Al Issa's attorney, Raymond Fink, a partner in Harter Secrest & Emery LLP. "The question is whether this is the best way to do it. This is a hurry up and a ‘Hail Mary.' "

Fink alleged that the elder Issa has invested more than $12 million in Statler-related expenses during the past three years.

"My client has more at stake in this venture than any other creditor," he said.

Attorneys representing the property's court-appointed trustee said the sale is necessary to stabilize the Statler.

Garry Graber, a partner with Hodgson Russ LLP, special counsel to Statler trustee Morris Horwitz, said the building was 50 percent occupied when Bashar Issa bought the Statler three years ago. Today its occupancy rate is less than 20 percent.

To hire a professional auctioneer to market the Statler, he said, would cost $45,000 - money the Statler does not have.

"We don't disagree that this is a ‘Hail Mary,' "Graber said. "That's exactly what it is. This is about economics, not anything else. Bashar Issa can't finance the building, and his father doesn't want to."

Wednesday morning, anchor tenant Park Lane Catering filed a $1.29 million claim against BSC Development Buffalo LLC.

The dispute over Issa's management of the Statler began in November, when Park Lane alleged that it had lost more than $1 million in bookings because of the building's condition and uncertain future.

Issa had pledged to invest more than $100 million in the Statler, bringing in a 150-room hotel and converting the upper floors into upscale condominiums. He planned to build a 40-story tower at the corner of West Mohawk Street and South Elmwood Avenue.

A minimal portion of the planned renovations ever took place, and the parcel slated for the tower was sold last summer.

Creditors petitioned federal courts to place the Statler into involuntary Chapter 11 bankruptcy, which Bucki did April 13.

Joseph Leon, attorney for Bashar Issa, said his client has invested $8 million in the Statler and has been "sabotaged by the economy."

"I walked through there and expected to see exposed drywall and hanging wires, but I didn't," he said. "When you peel back all the allegations, what you have is an economically challenged owner."