By JAMES FINK
Business First of Buffalo

The prospective buyers of the Statler Towers were granted a two-month extension to close on their deal to acquire the historic Niagara Square landmark.

U.S. Bankruptcy Court Judge Hon. Carl Bucki okayed the extension late Tuesday afternoon following a 45-minute closed-door session in his chambers and a 100-minute hearing in his courtroom. The extension is the latest twist in litigation involving the Statler that been going on for nearly a year.

The extension was sought by New Buffalo Statler Redevelopment LLC, a development group that bid $1.3 million for the 18-story landmark during a court-imposed auction Aug. 12. The extension is the second Bucki has granted New Buffalo for a deal that was supposed to close on Aug. 28.

New Buffalo Statler Redevelopment attorney David Pfalzgraf Jr. said the extension, which pushed back the closing date from Sept. 30 to Nov. 30, was needed because of the complexities involved in the transaction. The development team is not only working on the closing costs, but also on securing public and private financing for the group's proposed $100 million renovation of the building.

"The balancing test weighs heavily in extending the date," Pfalzgraf said. "The onus and burden has been placed on my client."

New Buffalo Statler Redevelopment LLC includes Buffalo businessmen William Koessler, Richard Sterben and Tom Zawadzki. The trio is proposing a mixed-use development to be anchored by a hotel, apartments, Class A office space, restaurants, a jazz club and Koessler's Park Lane Catering, a Statler tenant.

Since the auction, New Buffalo said it has invested more than $600,000 in hard and soft costs ranging from court-mandated deposits of more than $300,000 to paying fees to lawyers, architects and general contractors.

To convince the court of the seriousness of its offer, New Buffalo offered to make another deposit of $261,000 and to continue to pay carrying costs - roughly $15,000 per week in salaries, utility payments and other operating expenses.

"Mr. Koessler has virtually carried this building on his back for the past year," Pfalzgraf said.

Still, New Buffalo's request was met with some resistance, mainly from Buffalo attorney Raymond Fink, who represents Mohmoud Al Issa, the father of British investor Bashar Issa. The elder Issa alleges that he holds a valid $4.5 million mortgage on the Statler - a claim that is under dispute. Bashar Issa bought the Statler three years ago with grand development plans in mind. Those plans never materialized, as Issa is facing legal and financial troubles in both Buffalo and Manchester, England.

Fink questioned whether New Buffalo has the financial wherewithal to close the deal or complete the proposed renovations. He argued that Bucki should not grant the extension, but instead put the building out to bid a second time.

"We've got a high bidder who can't close," Fink said. "The reason they can't close is they don't have the money."

Pfalzgraf said negotiations are under way with city, state and county agencies about financial incentives for the deal. Talks are in place with out-of-town investors. The extra 60 days should allow for those talks to be completed.

"They say they are talking to the mayor (Byron Brown), this agency and that agency," Fink said. "Conversations are nice, but we are dealing with an empty vessel. We don't think 60 days will do anything."

Pfalzgraf, however, said his clients are committed to the project, to the point where they have agreed to carry insurance costs and pay for any emergency repairs, should any be needed, to the building's outside facade.

"My client is on the hook," Pfalzgraf said.

Both the court-appointed trustee, Amherst attorney Morris Horwitz, and special counsel Garry Graber, a partner with Hodgson Russ LLP, said the extension was the best option and offered the most hope for the building's future.

Graber noted that while the Aug. 12 auction attracted a lot of attention and a packed audience, only two entities ultimately bid on the building.

He said he was concerned that a mid-winter auction would not serve the building well.

"If you hold another auction, will anyone come?" he asked.

Graber said the money already fronted by New Buffalo Statler Redevelopment shows that the group is serious in its intentions.

"They've put enough skin in the game to recognize the extension," Graber said.

Both Graber and Horwitz said that if the deal is not closed by the new Nov. 30 deadline, it is unlikely that they would support a motion for a third extension.

"I'm confident this group will find a way to close this transaction," Horwitz said.